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Poor Credit Reports Extend Unemployment Woes

By Faye Mergel
Published: Tuesday, October 6th, 2009

Millions of employees were laid off because of the recession, placing many consumers in a struggle to keep their properties intact and their debts low. Lack of income source coupled with huge debts led to poor credit reports. As a further consequence, many unemployed Americans are denied job after companies pull out their reports from the bureaus.

Poor Credit Reports Extend Unemployment WoesConsumers are more worried about their future as employees increasingly practice credit check before hiring a person. Not only private companies but federal agencies as well consider credit report as an important document in the hiring process. A survey from the Society for Human Resource Management reveals that 35% of employers last year include credit check as part of their background screening. About a decade ago, only 19% of companies in America do that.

Company representatives say that the way a person manages his debts show his level of responsibility. Hence, they prefer to hire job applicants who have better credit reports, especially if the position being vied for involves monetary transactions and access to sensitive data. On the other hand, consumers say that being rejected on the basis of a poor debt standing decreases their morale and makes them feel more uncertain about their future.

Meanwhile, some employment lawyers believe that such practice can be used in a way that violates guidelines set out by the Equal Employment Opportunity Commission. An EEOC representative agrees, remarking that such pre-employment check discriminates minorities, who mostly do not have established credit records yet. This notion is supported by Tennessee Representative Steve Cohen who filed House Resolution 3149, a bill that aims to remove financial barriers towards employment. He was joined by Illinois Representative Luis Gutierrez, chairman of
Subcommittee on Financial Institutions and Consumer Credit, which oversees financial regulations in the country.

Experts say that while credit checks are still legal, the least that consumers could do is keep negative items from accumulating in their accounts. Career specialists advise job aspirants to get their credit reports from the bureaus a few months before applying so they can fix errors in it. Disputing a report is important since one-fourth to one-third of reports issued by credit bureaus contain errors which are serious enough to deny employment, according to Public Interest Research Group. Consumers are also advised to know their rights to avoid any violation of it.

Experts remind applicants that they should be informed if a credit check will be part of a job screening, so they can decide whether or not to waive their privacy rights.

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