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Legislation Puts Limit On The Use Of Credit Reports For Hiring Decisions

By Faye Mergel
Published: Friday, August 13th, 2010

98680276Credit reports of a potential employee can be checked only if permitted to do so, says a recent legislation that is being passed to about twenty states in the United States.

The legislation limits the ability of employers to check the credit history reports of their potential employees only after obtaining permission. Many employers state that the reports can tell a big picture about their future employees. The reports will tell them if the candidates are capable of embezzling funds especially when in a big financial debt. It would also tell them if the candidates are responsible and knows how to prioritize things relevant to work. For instance, a credit report of a candidate with an expensive car and gadgets can depict the image of the candidate being materialistic and being just happy for payroll day. The credit reports could tell employers if the candidates care a lot about their jobs, make decisions properly and focus on getting their jobs done.

The Society of Human Resource Management’s survey concluded that outstanding judgments appearing on the reports affect hiring decisions of firms in a negative way. Sixty-four percent involves judgments, such as lawsuits in court; 49% represents red marks on debt collection; 18%, high debt-to-income ratio and foreclosure at 11%.

To Senator Jay Paul Gumm, D-Durant, looking at employee credit reports for hiring decisions is unfair, especially after that has happened during the last recession. He states further that many people have lost their jobs because of the economy and using the credit reports as basis can bring a family down.

It is recalled that the recent recession caused many people to lose their jobs. Many of them have also foreclosed their homes due to high mortgage loan bills. These instances have been red marked on their credit reports.

In his recent bill, Senator Gumm proposes to put a limit on the use of the reports for hiring and other relevant decisions unless the job involves cash management or job that is related to the information they would like to check from the reports.

Several states such as Hawaii, Oregon, Louisiana and Washington, have already passed the law on the limit of use of credit reports.

Ben Woolsey, director of Marketing Research for states that job hunters should prepare their explanations upon giving permission to their potential employers. It can clear up negative marks that seems like it was irresponsibility but in reality it’s a necessity, he adds.

Other experts added that job seekers must always check their credit reports regularly and take advantage of the annual free check at They must look for errors and immediately report them to the credit bureaus. This will prepare them to be ready for an honest explanation.

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