updated 06-06-2013

An Act Regulating Use of Credit Reports by Employers

2013-2014 An Act Regulating Use of Credit Reports by Employers (House Bill 1744/Senate Bill 80)
Sponsored by Rep. Liz Malia

Since the start of the recession, tens of millions of people have lost their jobs. And since the recession, the percent of us with “bad” or low credit scores has increased to 25% of Americans, which is almost 45 million people.

At the same time, an increasing number of employers are now running credit checks on applicants and current employees, and often rejecting those with “bad” credit histories.

This makes it harder for people to find jobs and harder for our state’s economy to recover. It creates an unproductive cycle of not finding employment because you have “bad” credit and not being able to improve your credit because you’re unemployed.

But even if we weren’t trying to come back from a recession, and regardless of the high number of Americans that currently have bad credit, running credit checks on applicants and employees is unjustified, discriminatory, and unfair. HERE’S WHY:

  • For transgender job seekers, credit reports can reveal a past legal name, which can ultimately out that job seeker as having a different gender in the past. 
  • There is no relation between someone’s credit report and their performance as an employee or their likelihood to commit theft or fraud. None of the studies that have looked for such a causality or correlation have found one. Even the Director of State Government Relations for TransUnion, one of the three big credit reporting bureaus, acknowledged: “At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”
  • Overall, people don’t have “bad” or low credit scores because they are irresponsible, disorganized, or a spendthrift. Really, for the vast majority of people with “bad” credit, the cause is basic life circumstances and events. For some it’s a job loss or foreclosure. For others, student loans are to blame. Many people’s credit scores are damaged by a divorce. For some it’s an unavoidable result of needing to pay for groceries and utilities. And, for millions, it’s because of medical bills. In 2007, the Commonwealth Foundation found that about 72 million adults had medical debt. Somewhere around 30-40% or more of Americans have medical debt appearing on their credit report and lowering their credit scores. Another of the main ways people end up with bad credit is when incorrect information shows up on their credit report. 
  • Credit reports are full of errors. Studies done have found that from 25-70% of credit reports contain errors. Technically, if you know there is an error in your credit report you can dispute it and try to get the credit reporting bureau to fix it. But it’s often not that easy.
  • Getting errors in credit reports fixed is actually very difficult, and often the consumer is unable to do so. An investigation by the Columbus Dispatch found that of the people who filed complaints of inaccuracies with the Federal Trade Commission, more than half of them were unable to get the credit reporting bureaus to fix the error. Why are consumers so powerless to get these errors fixed? Many of these errors come from the data given to the credit bureaus by the “furnishers,” and when a consumer says one thing and the “furnisher” says another, the credit bureau’s policy is to believe the furnisher. And the dispute process is not set up to motivate or allow the furnisher to notice or acknowledge its error. 

So when an employer is making a decision about you based on your credit history, they’re using irrelevant data that has no bearing on what you’d be like as an employee. They’re using a credit report that is quite likely to have errors in it and that, even if you knew there was an error in it, you are quite likely not be able to get to get fixed. 

Have you experienced employment discrimination because of a credit check?

  • Did any of the jobs you apply for require a credit check? If yes, how many jobs had that requirement and what types of jobs were they? And if yes, do you believe that the credit check affected whether or not you got the job?
  • Did your employer (past or present) run a credit check after you were hired?

If you answered yes to any of the questions or have experienced the loss of a job, job offer, or where denied employment based on your credit report, please fill out MTPC’s Discrimination report.

8 other states have passed laws restricting employers’ ability to run credit checks on applicants and employees. Contact your legislators and ask them to support this important legislation.