Are Employers Making Crazy Assumptions?

A friend of mine, Josh, recently applied to job, had a positive interview, but ran into problems with the paperwork. They wanted to run a credit check on him.

In college, Josh was a little irresponsible and racked up a fair amount of debt. Now he wants to repay it, but was worried that this employer would disapprove of his past activity. The credit check was likely the deciding factor as he didn’t get the job and had to look elsewhere.

At least 16 states are now considering banning most employer credit checks, an act that will help give jobs to people who are trying to get out of debt. Josh was penalized for something that happened 5 years ago, and he has since changed his ways. Making the assumption that he is irresponsible and not letting him get a job adds insult to injury.

Unreasonable Conclusions

Another friend, Sally, went through a lengthy interview process, was offered a contract, and was ready to sign when she saw a strange non-compete clause. She didn’t understand why her administrative assistant job would require that, so she had her father, a lawyer, take it in to work and have a coworker who specialized in contract law take a look. He came back with a few concerns, which Sally relayed to her soon-to-be employer.

She received a call saying that the employment offer was being rescinded. My friend was confused why getting legal advice about the contract was a problem, but they explained that getting legal advice was fine, but going to her father for help was not and that it was a sign that she is too irresponsible to handle work without help from others. Whether that was the real reason or if the company had more of an issue with her not signing the clause we can’t be sure, but the employer’s assumption cost Sally a job.

They took a HUGE leap to come to the conclusion that she was unfit to work for them. Suddenly this 4.0 student with just about every award in the book isn’t responsible? It’s ridiculous that they would penalize her because of her father’s profession. Clearly this isn’t an employer anyone should actually want to work for. So I guess it is probably best that she found out early on that this company is crazy.

Are employing making big leaps with these assumptions against my friends? Is it fair to discriminate against those who have had credit problems in the past? Even if they are now trying to make up for it?

27 Responses to Are Employers Making Crazy Assumptions?

  1. Wojciech Kulicki says:

    I’ve long thought that the whole credit score thing is a bunch of bull–bad things happen to good people and sometimes, you just don’t have control over what happens. You shouldn’t be penalized for it for 7 years.

    On the second story, that’s just insane. Being in the same situation, I might consider a lawsuit against the employer–there’s GOT to be something illegal about that! :)

  2. I think more employers are now running credit checks, since there is a huge pool of potential candidates to choose from, they’re being picky. However, I don’t think a credit check should be the final indicator of if the person is responsible enough for the position.

    As for your second story, that is ridiculous. But it sounds like if the admin assistant was asked to sign a non-compete agreement, maybe there were other things going on in that company. They probably didn’t like the fact that your friend sought legal advice, whether it was from her father or not. Their response to why she didn’t get the job sounds immature and shady.

    • Daniel says:

      @Little House, If you’re not going to use the information from the credit check, why run one at all? It may not be the BEST indicator, but it may be the ONLY one. If I were an employer and I had two candidates, one with excellent credit and one with bad credit, guess which one I would choose. What would you do?

      It is crazy, I’m glad she found out that they were crazy now and not later.

  3. steve says:

    I’m not sure I agree with the posts criticizing credit checks. I do agree that it should not be the only factor, but it does seem like a reasonable factor to include. If indeed the person still has a lot of debt, that might make the employer concerned.

    As for not hiring someone because she asked her father for advice? That sounds like complete baloney. How many people don’t consult with family or friends before accepting a job offer? Sounds like that was a smoke screen used by the employer.

    • Daniel says:

      @steve, I’m not criticizing credit checks, if I were an employer, I would use credit checks on everyone. But isn’t it just adding insult to injury?

      I’m sure there’s a correlation between credit and responsibility, but isn’t it just punishing these more to say that if you’ve made money mistakes, you can’t work for us? It makes it that much harder to get out of debt.

  4. Mrs. Micah says:

    If legal, I might do credit checks, but I’d be most interested in a) recent activity & b) people with sensitive jobs or access to company finances. I understand why the government does it, in theory you don’t want people who can be more easily blackmailed or bribed.

    Must’ve been something shady going on with that other company, though. If someone’s dad’s a lawyer, of course they’re going to ask him for advice instead of paying a lawyer.

  5. Jacqui says:

    I can see why anyone involved in finance or the handling of money would need a credit check done. If you can’t keep your own financial house in order, why would I trust you with mine? I know it “kicks you while you’re down” if you’re one of the few people who are actively fixing the problem. But let’s face it, that’s not most people. And the fixing should be visible. You can tell when the problems were and what they were. Credit history checks make sense to me. Setting an arbitrary credit score requirement is, well, arbitrary. But so is minimum GPA, and that’s certainly not unusual.

    The legal advice thing? That’s just crazy. Sounds like the company’s trying to hide something and didn’t want to hire someone with such easy access to sound legal advice.

    • Daniel says:

      @Jacqui, Josh would have had a full time job! Now he’s still looking and will accept temp work. And guess what? Until he gets a real job, the payments will continue to show up as late on his credit report.

      • Jacqui says:

        @Daniel, hiring isn’t about being kind or even necessarily fair. It’s about finding the best possible candidate. However, if the job isn’t related to handling money or finances in some way then I agree the employer is out of bounds. I didn’t say *all* jobs deserved credit checks. But *some* could. Why would you ever expect an employer to hire someone to be responsible for company money when they’ve been proven irresponsible with their own? It’s like checking the driving record. It probably shouldn’t matter if they’re not going to touch a company car, but it’s a big deal for someone who’s going to do your deliveries.

        • Daniel says:

          @Jacqui, Hiring definitely is about being fair. That’s why there are so many laws banning discrimination! I’m not sure a credit check is unfair, so I would be a little surprised if these laws passed, but sometimes companies draw unfair conclusions, especially for jobs that don’t deal with finances.

          When I was hired by my current company, they ran a credit check, but I work with databases and have nothing to do with any account or money practices!

  6. thisisbeth says:

    I’m fine with credit checks. In fact, I think it should be required for certain jobs in the financial industry–but it should be looked at. If the problems in the credit history are more than five years old, and things have been clean since, that’s a different story–although I’d want the person to explain. (In fact, I’d probably ask in the interview, “If I ran a credit check on you, what would I find?” and give them a chance to explain themselves from the start.)

    I suppose they could assume the 4.0 student only had a 4.0 thanks to a lot of help, but really… It was because she had a lawyer look at their non-compete and they felt threatened. An employer can’t get away with anythying illegal if their employee has easy access to the law. If they were honest, they wouldn’t have cared.

  7. If I was a company, I’d run credit checks and look at the whole history. Transunion would show them when someone’s accounts hit bad streaks and how long they’ve kept it in check since then…I probably wouldn’t hire someone with current problems for any position in which resource management was a big part of the job.

    Your other friend was dealing with a lazy company. They didn’t want to look into their policy and skipped on her to get to the next candidate who wouldn’t complain. I hope she found something even better.

  8. Ira says:

    I think the credit check is similar to a criminal record check. Some companies do a background check of criminal record. It certainly is not fair to say that any criminal conviction means you can’t be hired. But, if used properly, it can be one source of information. I think the same with credit check. The way I would use both would be to run the checks and then discuss with the job applicant. He or she may have a reasonable explanation (“I did something dumb 5 years ago, but have been out of trouble, working productively, etc. ever since”).

    Ira

    • Daniel says:

      @Ira, Anyone can make a good excuse about how they made mistakes in the past and are now better. Having a conversation doesn’t do much, in an interview, very few people will say that they are irresponsible and can’t be trusted. It would take some great convincing to have them disregard the negative report. How do you use it properly without simply not hiring someone who has negative information on their report? In Josh’s case, 5 years wasn’t enough.

      • Ira says:

        Daniel, I’m sneakier than you. I would just tell the person that I had concerns based on their credit report and ask them for an explanation. I wouldn’t say that I know specifically that they defaulted on a loan, had ten late payments, etc. I’d just ask them if they knew about this and could explain. It’s really hard to make up something credible on the spot that conforms to the details in the credit report.

        Ira

  9. On credit checks – from the employers perspective. If a person cannot handle their own finances how can they rely on them to handle the companies. Some would say, “what about a job that doesn’t handle money.” Does that exist? Every employee may not handle cash and checks but every employee is by definition a working embodiment of the companies resources.

    One the non-compete. I would bet money (just not a lot) that the offer was rescinded only because the hiring manager wasn’t willing to challenge the status quo with the HR dept.

  10. Mrs. Money says:

    I interviewed with a bank a couple years ago and they wanted to run credit on me after the interview. I told them if they wanted to extend me an offer, then they could run credit. I didn’t get the job. :) LOL I wasn’t that upset about it though. ;)

  11. Mike says:

    Wow. That’s a little scary.

    They’re using credit scores as a proxy for how well performing an employee will be.

    I haven’t done any research but I doubt that there’s any correlation at all. Interesting post.

  12. Monevator says:

    What a crock, a company should have no right snooping into our credit history like that.

    Also, the average high flying company is going to run out of new employees pretty quickly if it excludes those with a bad credit check.

    In my experience half of the highly paid 20-somethings out there run up debts; it’s only in their 30s that sobriety strikes them.

  13. myfinancialobjectives says:

    Wow, I feel really bad for both of your friends. Having something that happened five years ago negatively affect your job hunt today is downright annoying. So your friend has bad credit, maybe he is an excellent employee, there’s no section on the credit report for that.

    Also I’m curious as to what the real reason that Jessica’s not so soon to be employer decided to rescind the offer. Either they were not planning on Jessica being smart enough to catch that clause, or something else…

  14. Diana says:

    I don’t mean to come across as sanctimonious. Most commenters took the other side of the argument. I think I’m just perverse by nature. So…

    Several thoughts on “Another friend, Sally, had gone through a lengthy interview process, been offered a contract, and was ready to sign when she saw a strange non-compete clause. She didn’t understand why her administrative assistant job would require that, so she had her father, a lawyer, take it in to work and have a coworker who specialized in contract law take a look. He came back with a few concerns, which Sally relayed to her soon-to-be employer.”

    I’ve had several Admin Asst’s. All but one have been promoted to other positions. The ‘one’ left to be a SAHM at the birth of her second. For me, it is a position of great trust, they are privy to information and potential deals, with time (trust) I use them as sounding boards, and they know me better than most everyone else I work with. I would have expected her to ask me directly why the ‘no compete’ clause. And then to tell me that she’d like to run it past her lawyer and/or dad. And then I’d have told her that it was probably non-negotiable if I thought that was the case so she could share that with her dad too.

    There are a number of ways her action may have been looked at negatively, especially if there were other very good candidates. Is Sally independent? Can Sally think for herself, speak up for herself, is she mature? Is Sally going to be high maintenance?

    I’ve never taken a contract to an attorney and had them okay it with no suggestions for changes. They always have concerns. I am not surprised that Sally came back with concerns. Now, I’ve got a candidate for a position requiring me to go to my legal department to say yay/nay. Hmmm how much back and forthing is going to be involved? How serious were these changes? Is it our standard contract and is this setting a precedent where we don’t want to go?

    I’ve hired many people during my career. Many fresh out of college. I did have one applicant’s dad attend an interview to make sure we were an appropriate place for his daughter to work. Usually when I make the decision on which candidate to hire I am riding a psychological high and will do what it takes to overcome minor obstacles. Being a 4.0 student with every award in the book isn’t a guarantee for success in the work environment. Her actions, or the way she handled it, might have been just enough to bring back the qualms of her vs number two and suddenly her negatives are looming larger and number two’s are looking smaller.

    I do sincerely hope she has found/will find an even better opportunity than the one that got away.

    I’ll just add my comments on Josh. An employer needs your consent to do a credit check. Since Josh ‘was worried that this employer would disapprove of his past activity’ he should have taken the opportunity at that time to explain his credit standing. Being upfront and taking responsibility for his actions might have made a difference. It’s frequently the only chance a person gets to explain their situation and how they plan to deal with it. Not saying anything when you know what is going to come out is like saying ‘I hope they don’t catch this’ and then the employer wonders ‘what else’ or is that how he’ll handle issues that come up here too.

    The individuals doing the interviewing are human. The company may not be. Rational and fair don’t always apply but usually do. The applicant doesn’t know what prior bad experiences the interviewer or company has dealt with. If you really want a certain position you have to sell yourself well. Hopefully Josh has learned from this and is prepared to handle it the next time it comes up.

  15. C says:

    People who are compromised personally are more likely to succumb to temptations of fraud, whether they are good people/employees or not. I’m also not sure it’s the only factor that cost him the job. I know plenty of people with less-than-desirable credit that found gainful employment, many of them right out of college with a fair amount of debt and possibly a late payment or two(myself included– and I’m in banking). If the company wants to hire you, they will. Having a positive interview isn’t necessarily mean you’re in the door. What if ten other candidates also had positive interviews? Did he do proper follow-up (thank yous, etc.)?

    It’s unfortunate and discouraging, but perhaps he should focus on making sure his qualifications and interview skills can outshine his credit follies, and being upfront if he knows the company will run a credit check.

  16. Samurai says:

    A credit check should be an option, but not mandatory ie a company can ask, and if the candidate declines, then the company cannot legally. Of course, the company can just reject the candidate, so best to have good credit!

    As for Sally, if she’s raising so many eyebrows and using a lawyer (father or not) to rake through the admin position temp contract, it IS a red flag that she could be highly high maintenance with a penchant to sue. Imagine if a colleague looked at her the wrong way! I see the employer’s point of view.

    Sam

    • Daniel says:

      @Samurai, The thing is that the employer wanted a non-compete clause for a secretary position! Who asks that?

      This girl is super smart and was acting very innocently. There’s something wrong when a company rescinds an offer based on incomplete information.

  17. Jordan Gunderson says:

    First off. I can see why Sally lost the position. Lawsuit, legal, lawyer is a red flag that people dont want to deal with. Challenging the status quo is frowned upon as well whether people say so or not. I have been working for years and I say that what employers want really really want is yes men and women who do what they are told and take enough initiative not to bother the boss but kiss a** appropriately. Sally not only showed she could think for herself (a big no no in any assistant position) but that she would not hesitate to involve lawyers. The real problem is EXACTLY the opposite of what they stated. Its not that she went to her dad. Its that she would act against the status quo.

    Also credit checks are evil and need to be revamped for financial purposes, they need to be taken out of the private sector and only released when you apply for credit. Credit reporting as a form of character reference needs to be banned and punishable by a penalty that would hurt the richest of the rich. Pure evil. Kick the little guy.

    • Daniel says:

      @Jordan Gunderson, I get why they did, but I think it’s total nonsense. She’d be great in that position, even they thought so after several interviews!

  18. Yes, they are making unfair assumptions. I always had good credit and one bad move. No thanks to my local bank that told me I should go on vacation and payoff my car using my homes equity and now even just applying for another job has been difficult. These judgmental employers think that because my husband had some difficult times with work and we missed a couple of payments on the second mortgage, I’m not good enough to work for them. They don’t say it but it all looks good till they reviewed my credit.

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