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Poor Credit Scores Worsen Unemployment Rate

By Sally Maison
Published: Monday, September 7th, 2009

The number of job applicants getting rejected due to their poor credit scores is increasing. Things could get worse as the number of employers checking on credit scores for current and potential employees is increasing. Statistics from the Labor Department is not available yet, but surveys by human resource companies reveal that credit scores 530 and below raise an automatic red flag to hirers. 

Poor Credit Scores Worsen Unemployment RateBack in 1998, only 25 percent of employers pulled out credit reports of job applicants. This number has almost doubled in 2004, with 40 percent of employers in the United States wanting to know about a job applicant’s credit reputation. Now that unemployment rates are up and credit scores plunging down, many Americans are worrying more about their future.

As of July this year, the national unemployment percentage, according to the US Department of Labor’s Bureau of Labor Statistics, is 9.4%. That is a 4.4% increase of the total unemployment rate of 2008, which is at 5.8%.

Unfortunately, there is still no law that bans employers from pulling out credit reports of job applicants. However, the Fair Credit Reporting Act (FCRA) bans companies from checking credit report and score without permission of job seekers. This, again, is a lost cause. Companies require job seekers to sign a document allowing them to conduct pre-employment background checks on job aspirants. However, this pre-employment waiver gives the company rights to check on a person’s credit report.

On a brighter note, Congress is pushing a bill which prohibits discrimination of applicants on the basis of their credit score. Kim Hixson, a Democrat from Wisconsin State, authored a bill which will classify credit scores as one of the discriminatory assessments by employer. This will make rejecting an applicant due to his credit score equal to denying him employment because of gender, race, disability and age.

More importantly, the Federal Bankruptcy Act prohibits a company from discriminating a person on the basis that he has filed for bankruptcy.

Credit specialists advise job seekers to know their rights and make sure none is violated when they apply for a job. The Fair Credit Reporting Act (FCRA) mandates companies to inform a job applicant that checking on his credit report and score is part of the screening process. Employers should also notify an individual promptly if his consumer report will affect his hiring negatively. 

While consumers are fighting hard in their struggle for a living, Federal Reserve Chair Ben Bernanke predicts that the economy will get better by the end of 2009. This gives consumers more reasons to be hopeful and more reason to hold on to their job resume.

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