Employees are warned against temporary financial setback

News on jobless workers that have been sidelined due to bad credit has circulated recently. Although no longer a fresh news, employers warn possible job applicants about the setbacks of bad credit for long-term employment.

Employers are now reliant on credit checks when it comes to screening possible employees. This has turned out to be bad news for many jobless Americans who usually have trouble keeping up with their bills.

A recently conducted survey from the Society of Human Resource Management shows that majority of employers today use credit checks to screen new applicants. This is particularly true for jobs that involve access to cash and confidential information or financial responsibilities. Senior executives are also required to have good credit rating.

Survey on Employers

According to 60% of employers who responded to the survey and said that they check credit history, their hiring procedure is based on the conventional wisdom that credit history is a good indicator of an employee’s trustworthiness and reliability.

These qualifications are very important for new hired workers who will be given access to financial systems and large amounts of cash. According to Lester S. Rosen, CEO of the job screening company ESRcheck, it is reasonable for companies to go through the financial status of employees to determine if they have huge amounts of unpaid debts.

Running a credit report is necessary because employers cannot afford hiring possible swindlers. Worst case scenario, the company may end up litigated for negligent hiring. Although it does not always follow that people with bad credit record are swindlers, one cannot blame companies for taking the necessary precaution.

There are other reasons why this system of hiring employees has become prevalent. A couple of years back, the prevailing method of hiring applicants is through detailed references from the applicant’s previous managers. Since there have been plenty of court proceedings that involve negative reference, many companies provide only the basic information such as description and dates of employment. For obvious reasons, this method is no longer deemed effective.

Changes in the employment process have created a chain of effects from regular consumers to the economy in general. The loss of a job usually follows trouble in paying bills. The damage that this causes to their credit history can be a main barrier for getting a job. This is why many unemployed citizens are falling on a vicious spiral.

With millions of unemployed Americans for the last six months, this method of hiring new employees has faced scrutiny from the public. Other than the effects of long term employment to a person’s credit, many Americans are also facing the expiration of their unemployment insurance.

On top of this, consumers who have never been late on paying their bills are also affected by this critical situation. Lenders are now cutting back the limits regardless of the borrower’s status. In effect, there are card holders who end up owing more with the adjustment of the credit limits.

Critics of this method of hiring new employees claim that there is little to no correlation between a person’s job performance and his or her credit rating. Employment lawyer Adam Klein stated that there are no evidences or scientific proofs that validate the link between a person’s suitability for a job and his or her debts to pay.

He argued that one concept does not reflect the other. In fact, having debt can encourage and motivate an employee to work harder so that he or she can generate more income. It does not also follow that an employee with good credit rating will definitely turn out to be the best suited for the job.