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The Integrity News
"objective risk management news"
Vol. XVI   No. 2
ISSN 1081-2717


The Integrity Center, Inc.
January 23,  2007  

Using Credit Bureau
Reports In The
Hiring Process

An article entitled  "Credit Checks Become A Civil Rights Issue"  written at the Christian Science Monitor appeared on the CBS News website on January 18, 2007.

The article makes some accurate points.   However, in  our opinion, the general thesis of the article, and some  of the points made, are simply are not reflected in the  national daily work of corporate employee selection.   Yet, it is important that you know that there are people  who are thinking like this.

The beginning of the article sets its tone by saying the following:   "Studies show that minorities are more likely to have bad credit, but credit problems have not been shown to negatively affect job performance."

Then the article sets it thesis by saying:   "Some privacy and minority advocates are now seeing credit as a civil rights issue as minorities start to fight employers and insurers who base decisions on credit histories."

We are only discussing the employment issue here, not applications for insurance or other financial transactions.

One can see that the wording in the above quote tries to set the stage for a confrontation between minorities  and employers over the use of credit histories.   In more than 20 years of helping companies with their employee screening, we simply do not see this developing "fight".


A job is a privilege not an entitlement.   Employers who can grow their businesses, will look at any applicant who can add value to their operations.   However, all employers have risk, and they try to mitigate that risk by embracing new employees that are who they say they are, who have the experience and training that  they claim, and who can add value to the employer's operations.   Employers use background check reports  to help them evaluate these things for each applicant.

ALL reports that employers purchase for employee  screening ( background checking ) are governed by the Federal Trade Commission (FTC) which is charged with enforcing the Consumer Credit Reporting Reform Act of 1996 and its subsequent amendments --- popularly known by its former name --- The Fair Credit Reporting Act ( FCRA ).

Any background check reports on prospective employees  ( not just credit reports as implied in the article ) can only  be purchased in compliance with the FCRA if the employer:   (1) discloses its intent to check using the FTC and State prescribed  procedures which include giving the applicant a copy of  his/her Rights Under the FCRA,   (2) obtains a written  Authorization from the applicant to obtain any reports  about the applicant, and   (3) complies with Federal and  State laws regarding any intended Adverse Actions.

Credit reports come from Credit Reporting Agencies (CRAs) ( which include the basic Credit Bureaus ), and  come in two flavors --- with and without credit scoring.     Employers do not get credit score interpretations on  their reports as the article correctly states.

For employers, credit bureaus commonly sell either the entire credit report ( Personal Credit History ), just the top half of the first page of the credit report commonly known as the  "credit header"  ( ID Verification ), or just the first two lines of the credit report which contains the  applicant's name and SSN ( SSN Verification ).

Most employers are interested in the  "credit header"   which can contain the accumulated address, job, and  other information from prior credit applications by the  consumer.   Employers know that any data in the credit header should jibe with the information presented by  the applicant on their Job Application.

The Integrity Center, Inc. pays the credit system an additional fee to wash each request against the current quarter's Master Tape from the Social Security  Administration.   That way, the employer knows that it is listening to the Federal Government talking if any of   17 irregularities are present ( such as  "this SSN has  never been issued"  ).


Employers are required to use a Social Security Number ( SSN ) to report wages paid and deductions made.   Therefore, they must know that the number presented by the applicant actually has been assigned by the Federal Government to only that very person.

Similarly, employers are required by the Immigration  Reform and Control Act (IRCA) to verify the employment eligibility status of newly-hired employees.   This is done  by completing the Federal I-9 Form using it's prescribed  forms of identification.

However, prior to hiring, an employer is entitled to know  that the applicant is who he or she says they are.   That  step for the employer is normally facilitated by using an  SSN Verification, or an ID Verification ( which usually  contains additional information ).   The information had  better correlate with what was presented by the applicant  on their Job Application and in their Resume if they  present one.

The point is that most employers know the above.    It is  our experience that while most employers request one  of the three types of credit bureau reports, less than half  of the requests are for the full Personal Credit History.   Employers spend the money for the full credit report if  they have a business related need for the financial  information.

A Personal Credit History is frequently requested if an applicant is going to handle money, if they are going to  travel for the employer and will need to be able to rent  cars and buy tickets, if they are going to be responsible  for the private financial data of the employer's clients,  if they are going to be handling the personal records of  fellow employees, if they could expose the employer to  money laundering charges, or if they will be managing  funding for the employer.

However, most employers want to at least try and be  sure that 
"Joey is Joey"
.   They do look for any Federal  Social Security Administration ( SSA ) flags on their  reports, and they do compare the data on the credit  bureau reports with what has been presented on the  Job Application.

Employers do not get credit scores, and it simply does not seem to be the case that they would reject applicants because of a poor credit profile.   Employers know that  many people have credit problems, and good, reliable, experienced employees are hard to find.   Of the roughly 40% of employers who purchase an applicant's credit report, it is simply not the case that they use those as the litmus test for hiring.

Further, it is not the case that credit checks are becoming  "a civil rights issue".    We see no data trends to give that thesis any merit.   However, some advocates could profit  handsomely if they could get that band-wagon started.

According to the article,  "the Equal Employment Opportunity Commission ( EEOC ) , which reviews all such cases before any lawsuits can be filed (...... says that) there's anecdotal evidence these cases are on the rise."   What that really means is that some people are filing the cases.   It does not  mean that employers are increasingly using credit reports  to discriminate.

If you would like to discuss the proper and effective use of the various credit bureau reports in the hiring process,  please feel free to call   The Integrity Center, Inc.   anytime at   (972) 484-6140.   Helping you with your Risk Management and HR Automation is what we do.

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