The Integrity News
"objective risk management news"
Vol. XVI No. 2
January 23, 2007
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".
LET'S REVIEW THE BASICS .............
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" ).
NOW, USING CREDIT BUREAU REPORTS .......
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
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
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
"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
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
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.