Credit checks reveal fiscal responsibility of applicants 

The thought is simple – if you cannot manage your home budget, make good decisions with your money or honor your personal debts, how can your employer trust you to do so at work? According to the Society for Human Resource Management, in 2007 approximately 35 percent of the companies it surveyed used credit reports in their hiring and employee promotion process.

Relating the personal life of an employee or potential employee to the job is nothing new. Years ago IBM was legend for sniffing into home details of its managers. The car trunk was a major source of information, with a traveling exec simply being asked to be met at the airport and then stowing bags in the trunk of their host ride.

The trunk should be clean and devoid of greasy tools, used diapers, beer cans, clutter and the like. A bag of expensive golf clubs was okay. Such were the unwritten expectations of a company proud of its image and expecting 24/7 homage to it. Of course IBM has changed, but not our concern over the personal-professional connection of those we might hire, or consider for promotion.

I have heard countless upper level managers with firms in the public eye telling of the “drive-by.” When a mid-level manager is being considered for a bump in status someone drives by her or his home and scopes out their yard and the front of their house. Is it painted, trimmed, maintained, and attractive? No broken bikes in the yard or rusting cars in the drive? No junk, nothing parked in the street? 

I even once listened to a school board engage in conversation about teachers – that the reason kids were so messed up is that many of their teachers had been divorced, couldn’t manage their own lives and thus were not good role models for the students. That conversation did not go far and never into policy or practice, but it gives a great insight into the thinking that takes place in the hiring and employment process. 

Today, we tend to dress less formally for work, divorces are commonplace, and there are many personal attributes of our “hires” that we might just as well not know. But credit reports are easy and since we are already requiring drug testing and criminal background checking it “makes sense” to round out the investigation and look at debt and bankruptcy too. 

My quick check of the law shows the Fair Credit Reporting Act (FRCA) requires written permission by the applicant for the employer to have a third party conduct a credit check. But, of course, denying approval seldom advances a candidate in a search. 

Bankruptcy it seems is protected under Title 11 and cannot in and of itself disqualify a candidate. But any failed bill-paying leading up to the bankruptcy could be used adversely. 

Given the power and availability of electronic searches today I suspect we’ll see more and not less of using all information available in hiring decisions, especially at specific levels of rank or responsibility. The drive-by is no longer needed, we can look at an applicant’s front yard from our computer…and sneak into the back yard too. 

The Federal Trade Commission has an excellent web site on this issue.

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