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Are Credit Checks Keeping The Jobless Out Of Work?

Unemployed

First Posted: 10/25/10 07:16 PM ET Updated: 05/25/11 07:05 PM ET

After working for the same railroad for 14 years, never missing a house or car payment, Sammy Bailey says he never expected his credit score to keep him out of a job. But after being laid off in March 2009, he soon found himself unable to make payments on his house and his car, and his credit took a big hit.

"My house payment was $800 a month and my truck was $665 a month, and I was only making about $1200 a month on unemployment," Bailey, 42, told HuffPost. "I couldn't afford to keep up with the payments, lost both the house and the car, and that's what caused my credit score to go down."

Bailey said he applied for a new job at Am-Rail in Kansas City, Missouri, three weeks ago but failed to pass the background check because of his poor credit.

"When they run a credit report on you, I guess the score is supposed to determine what kind of employee you are," he said. "I've had very few jobs in my lifetime, and every job I've had I stuck with for a very long time. Seems like they should go off of you, not your credit score."

While the credit check has long been a routine part of the job application process, experts are wondering whether it's still a fair screening tool in the wake of a recession that has left 15 million Americans unemployed and unable to keep up with their bills.

In a meeting of the Equal Opportunity Employment Commission last week to discuss the use of credit history as a discriminatory barrier to employment, a panel of legal experts and social scientists explained how the screening practice may be harmful and unfair to American workers.

"A simple reason to oppose the use of credit history for job applications is the sheer, profound absurdity of the practice," said Chi Chi Wu, a staff attorney at the National Consumer Law Center. "Using credit history creates a grotesque conundrum. Simply put, a worker who loses her job is likely to fall behind on paying her bills due to lack of income. With the increasing use of credit reports, this worker now finds herself shut out of the job market because she's behind on her bills. This phenomenon has created concerns that the unemployed and debt-ridden could form a luckless class."

According to a survey conducted by the Society for Human Resource Management, 60 percent of all organizations polled said they conducted background checks on applicants, and 17 percent in the Northeast reported that favorable background check results are the most important factor influencing the final decision of whether to hire someone.

Considering the fact that more than half of all working adults in America have either been unemployed, taken a pay cut, had their work hours reduced or become involuntary part-time workers since the beginning of the recession, more and more job applicants are hampered by blemishes on their credit reports in the search for a steady salary.

Enrique Francisco Figueroa, 40, told the Arizona Republic that after missing a few mortgage payments on his home while applying for a loan modification, he was rejected from a job with the Transportation Security Administration based on his credit report. Scarred by the experience, he said he has given up on applying to organizations that conduct background checks.

"Even now, I see myself applying for jobs I am way overqualified for," said Figeroa, who was laid off from his job as a commercial fire-alarm inspector in 2009. "I am applying for warehouse worker (jobs) or bus driver, stuff like that."

Despite the fact that credit checks weed out some candidates like Figueroa whose spotty credit reports are products of the recession, proponents of the screening tool told the EEOC last week that credit checks are a necessary part of the screening process.

Michael Eastman, an executive director at the U.S. Chamber of Commerce, contended that very few employers conduct credit checks at all, and those who do often take individuals' circumstances into account.

"Not all debt is created equal in the minds of employers," he said. "The circumstances under which an $80,000 debt in collection arose may be irrelevant to a credit score, but to an employer the circumstances matter a great deal. It is my experience that employers are much less likely to be concerned with debt that arose as a result of a medical issue, a period of unemployment, or a divorce. On the other end of the spectrum, some types of debt might raise red flags more quickly, such as gambling debt."

The EEOC meeting was the first in a series throughout the year that will examine discriminatory barriers to employment in the wake of the recession.

Have you been rejected from a job due to bad credit? Send your story to LBassett@huffingtonpost.com.

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