The Perils and Pitfalls of Bad Credit

As More Employers Run Checks, Young People Have to Know These Issues and Have to Know Their Score

by Annie Shao, age 16

Finding a job is extremely difficult, especially during a recession. Unemployment numbers among teens are currently very high and getting worse. Certain employers make finding a job even harder by carefully checking the credit scores of job applicants and rejecting those with bad credit histories.

Legislators in at least sixteen states are working on bills regarding this issue. In Wisconsin State Representative Kim Hixson drafted Assembly Bill 367 (AB 367). This measure would ban employers from judging applicants based on credit scores. The bill seeks to include credit history in the list of characteristics like race, gender, marital status and sexual orientation. Employers are forbidden to use those factors to discriminate against applicants.

Hixson’s bill is currently waiting for a full vote in the Assembly. Labor unions, including the AFL-CIO, are in favor the Hixson bill, while the Wisconsin Manufacturers and Commerce Association opposes it.

Wisconsin is one of several states considering the issue of credit discrimination. Hawaii and Washington already have laws in place. Exceptions to such laws are common in cases where an applicant’s credit information is relevant to the job for which they are applying. Wisconsin’s proposed AB 367 includes a similar exception.

On the national level, Representative Steve Cohen of Tennessee has proposed a similar bill in Congress. Cohen’s bill is still in committee.

People like Hixson argue that using credit history to prevent someone from getting a job is part of a vicious cycle. In the current recession, many people have lost jobs. They then get behind on bills, and this results in lower credit scores. This cycle makes finding work and paying off debt far more difficult.

Unexpected life events can also cause credit problems. For example, Terry Becker, got into debt because his young son was having seizures. During the first year of treatment he accumulated debt. At this time of family stress several of Becker’s employment applications were declined because of credit checks.

Becker’s situation led Hixson to write AB 367. Hixon says there is no proof that people with bad credit are bad workers. Becker says he worries about other people who are struggling with debt.

Some states, however, are not against credit checks. Maryland’s Chamber of Commerce opposes bills like Wisconsin’s AB 367. Opponents of such measures say they are not interested in job applicants’ credit scores. They are more concerned with debt collection records and legal judgments. Most agree that poor credit caused by medical bills or school loans should not affect employment. 

On the other hand, Mark Aitken of the Society for Human Resources Management says that credit checks can be useful to employers making hiring decisions. He points out that bad credit can be an indicator for potential fraud.

Credit checks and credit scores are currently controversial issues in the United States. Experts point out that it is now more important than ever for young people to know about these issues, understand how credit works, and plan accordingly.

[Sources: Associated Press; The Wall Street Journal; Newsweek]

Which came first, the problem or the soultion? Luckily it doesn't matter. – EckaWhich came first, the problem or the soultion? Luckily it doesn't matter. (2015-11-28 00:10)