Should credit scoring have a place in job recruitment?

Should credit scoring have a place in job recruitment?

By Liz Lockhart

It would appear that in the US there is an emerging trend for companies to use credit reports as an employment screening tool.  Mental Healthy has checked with several UK agencies and organisations and it would appear that this is not something that is happening in Britain.

Many people suffering from poor mental health find it difficult to work, at least for a period of time.  Unemployment can have a knock-on effect on an individual’s credit report.  Many people who have suffered from mental ill-health find gaining employment difficult enough without having to worry that they will be doubly disadvantaged, through credit checking, when trying to find work placement.

Using a summary of your credit report, your credit score, to screen potential employees is not supported by the evidence which it suggests. In a new study, researchers found no correlation between poor credit scores and bad behaviour in the work place. 

Your credit score is worked out from information in your credit report in the form of a three digit number.  In the US, the most commonly used credit score is the FICO score which is not a permanent part of your credit file.  These scores are not shared with third parties, including current or potential employers, by any of the credit reporting agencies.

However, according to a 2010 poll by the Society for Human Resource Management, 60% of surveyed employers do conduct credit checks for some or all candidates as part of their hiring process.  This involves getting a credit report but not your credit score. 

This new by the Louisiana State University study appears in the Journal of Applied Psychology.  It shows no connection, for example, between poor credit scores and theft but does throw up some interesting connections in other areas. 

‘With regards to personality and credit, it makes sense that conscientiousness is related to good credit, but what was really interesting was that agreeableness was negatively related to your credit score,’ said Jeremy Bernerth, Ph.D., assistant professor at Louisiana State University.

He added ‘That suggests easygoing individuals actually have worse credit scores than disagreeable and rude individuals.’  According to Bernerth such congenial people might get themselves into trouble by taking out additional credit cards at the suggestion of store clerks or by co-signing loans for friends or family.

‘It is telling that poor credit scores were not correlated to theft and other deviant types of work behaviours,’ said Bernerth.  ‘Most companies attempt to justify the use of credit scores because they think such employees will end up stealing, but our research suggests that might not be the case.’

Although the study looked at credit scores and theft, employers do not have access to a potential employee’s credit score, only their credit report.  The study suggests that the summary of your credit report/your credit score, has no predictive value on whether you will steal from an employer. 

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