I think the practice of using a credit check on job applicants is questionable. It is justifiable if the position that the applicant is going for requires bonding, certain types of licenses (series 3, series 7), or requires a security clearance. I haven’t seen any proof where there is a correlation between good credit and good job performance. In many ways, the correlation may actually be a ‘reverse’ correlation. A person with a high debt load may actually be a ‘better’ employee because they are living paycheck to paycheck and really need that next paycheck, versus an employee that has over 1 years worth of income saved up.
There is a secondary problem with using a credit report on job applications, where it really is not warranted. It creates a scenario where one financial mis-step can make a persons financial life unrecoverable. After one mis-step, they are placed at the ‘back of the line’ for job applications irregardless of their actual job qualifications.
Finally there is another problem. Current credit reports are not really a measure of credit-worthiness. It is really the measure of the use of credit. A person who buys with cash, or has ‘surplus cash’ will show up poorly on credit reports. This is the same hole that many banks fell into when writing mortgages. They just used the FICO score and did not check if the person could really pay off the mortgage. It is a problem that I have also run into several years ago when applying for an apartment. A credit report on me basically showed up nothing, because I largely buy with cash (if I don’t have the money, I don’t buy it). I ended up showing the apartment management company representatives one of my bank statements.. which had her looking at it for a while. She didn’t understand why, with that type of balance, I didn’t show up on the credit report. I had to explain to her what a credit report really is, and how it works. If you don’t have any debt, particularly if you never had any debt, you will not show up on credit reports.
