A career chiller

Keeping a clean credit record may not be the only reason why consumers should not fall behind on paying bills.

With a high jobless rate projected for the Triad for most of this year, it also could make the difference in whether one lands or is rejected for a good job.

According to federal agencies and employment officials, more employers are reviewing the credit background of job applicants, along with doing criminal, drug and employment checks, as research technology becomes more available and less expensive.

Which means that having a dinged credit record may be as burdensome to overcome as an employment gap on a resume.

"The practice has become even more popular during the recession, as employers attempt to thin out the flood of applicants each job posting brings," said John Challenger, the chief executive of Challenger, Gray & Christmas, a Chicago consulting company.

Other employment officials said that a suspect credit report could be the final factor in employers choosing between otherwise equally qualified candidates.

"Although it may keep them from obtaining a particular job, they may not necessarily know the reason for rejection," said Archie Hicks, the manger of the N.C. Employment Security Commission's office in Winston-Salem. "Employers are very circumspect about giving reasons for not hiring."

There is some debate about exactly what employers are looking at with applicants' credit backgrounds.

According to CNNMoney.com, employers are not allowed by law to use credit scores as part of an employment screening. But they can look at credit reports.

The three major consumer-reporting agencies -- Equifax, Experian and TransUnion -- say they do not provide credit scores to employers for potential employment screening.

The operators of The Credit Scoring Site said that "when it comes to the rules for credit-score use in pre-employment screening, it is hard to know what to believe." Its Web site -- www.creditscoring.com -- does contain advertisement links for getting credit scores and reports.

What is clear is that some industries, such as financial services, tend to pay closer attention to the financial status of job applicants as part of determining whether they may be susceptible to committing fraud or theft.

A recent survey by the Society for Human Resource Management found that 40 percent of human-resources managers do not conduct a credit background check on job candidates. Another 47 percent said they do, particularly for employees who handle money or have fiduciary responsibilities.

"Some employers look to credit backgrounds because there may be limited information to gain from employment checks," said Elizabeth Owens Bille, an associate counsel for the group.

"About 60 percent do the credit background checks after making a contingent offer, while 30 percent do it between the interview and making an offer. With the cost of hiring and training being expensive, companies want to access everything they can to ensure they make a good hire."

Noelle Talley, a spokeswoman with the N.C. Attorney General's Office, said that some consumers are doing credit checks as much to see what potential employers might find as over concerns about identify theft.

Some economists say that an increasing reliance on credit background checks by employers may be adding more stress to households struggling to stretch their money far enough during times of unemployment, underemployment and no-pay furlough days.

"With so many blemished records out there these days, having a low FICO score doesn't represent the sort of moral stigma it used to," said Tony Plath, a finance professor at UNC Charlotte. "However, it's going to become a significant impediment toward job growth if employers don't revise their hiring standards in the next few years.

"They will need to reflect the notion that a falling FICO score isn't necessarily a sign of bad moral character and hire people with newly blemished credit records."

Still, Challenger said that more states are trying to restrict employers' abilities to review a job applicant's credit background. He added that some employers are running credit background checks of current employees as well.

"More states are arguing that these exclusionary practices are not job-related or justified by business necessity," Challenger said.

"At a time when many Americans are struggling with bad credit, is it fair or even advisable to use this as a hiring determinant? Are criminal records and credit scores good indicators of potential workplace behavior or performance?"

Piers Clarkson, the director of executive recruiting for The Clarks Group of Winston-Salem, said he is not worried about credit checks increasing in usage among local employers.

"Many of our clients that previously conducted such background checks discontinued the practice, as it has been statistically shown that the correlation of credit history has no bearing on performance," Clarkson said.

"Employees in banking and finance are usually more prone to protecting a strong credit rating for the sake of career progress."

Clarkson said that many hiring managers understand the financial drain of being unemployed and underemployed.

"If job hunters can be prepared to offer a reasonable, valid and provable letter of explanation, that can help employers in addressing any concerns and maximizing the job hunter's chance of receiving an offer," Clarkson said.

"Employers are generally more open-minded to economy or medical-based credit issues in comparison to responsibility-based problems."

rcraver@wsjournal.com
727-7376