Amanda L. Scott is an Alabama native, D.C. transplant, civil rights paralegal in the Georgetown University Class of 2019.
I almost missed out on my dream job because of $400 in medical debt. After receiving a job offer, I agreed to undergo a credit check as part of a routine background investigation.
My credit report showed two debts from visits to urgent care centers. When my mom lost her job, I was unable to afford health insurance for two and a half years — pushing me into medical debt.
I never imagined that my debts would affect my job prospects. But the hiring manager told me I had to show that the debts had been paid or removed from my credit report before they could move forward with my approval.
The federal Fair Credit Reporting Act permits employers to make employment decisions based on the credit history of job applicants. Under the 1970 law, employers must first obtain written permission from job applicants or current employees to conduct a credit check. Employers then must notify job applicants or current employees if they take “adverse action” against them based on their credit report.
Although employers cannot obtain employees’ credit scores, they can access the details of their credit reports, including the balances and payments on student loans borrowed, home mortgages taken out, credit cards opened and bankruptcies filed.
As I considered future employment opportunities, I was put in a difficult position: Should I pay off my medical debt and risk being unable to pay my current bills, or should I let the job opportunities go and risk being unemployed?
I ultimately was able to pay off the debt for a better future for myself, but many people are not in that position. Often, people lose out on jobs because of poor credit, usually for reasons that are out of their control.
A 2013 survey by Demos, a public policy organization that combats inequality, showed that 10 percent of respondents who were unemployed had been informed that they would not be hired because of some facet of their credit history. The same survey indicated that 1 out of every 7 job applicants with “blemished credit histories” had been told they were not hired because of their credit history.
Over the past decade, employers have increasingly used credit checks to assess job applicants’ character, judgment, reliability and even their likelihood to commit theft or fraud. According to a 2012 report by the Society for Human Resource Management — a professional society for human resources — 47 percent of employers check candidates’ credit histories.
Employers may think: if job candidates cannot be trusted to pay their personal debts, how can they be trusted to do their jobs?
Yet poor credit is more likely to be the result of uncontrollable factors such as unemployment, lack of health insurance and medical debt, rather than character flaws or bad judgment. A study from the Consumer Financial Protection Bureau found that 52 percent of all delinquent accounts reported by collection agencies were from medical debt.
Moreover, problems of poor credit are more likely to affect already disadvantaged communities, such as people of color. Black and Latinx householders tend to have lower credit scores on average than white householders, largely due to predatory lending and credit discrimination against these communities. Demos has also noted that communities of color are disproportionately likely to have poor credit reports.
The good news is that legislation is in the works to emphasize equality in our employment system. In September, Sen. Elizabeth Warren (D-Mass.) and Rep. Steve Cohen (D-Tenn.) reintroduced the Equal Employment for All Act of 2017, which would prohibit employers from using credit checks against prospective and current employees for the purposes of making employment decisions.
“It makes no sense to make it harder for people to get jobs because of a system of credit reporting that has no correlation with job performance,” Warren said when reintroducing the bill in the U.S. Senate.
Eleven states have already passed laws limiting credit checks in employment, an important step toward equalizing our employment system. A 2016 study at Harvard University found that laws prohibiting credit checks have had a positive effect on employment rates in communities with poor credit. Those with average credit scores below 620 — generally considered poor credit — saw an employment increase by roughly 3.7 to 7.5 percent.
Banning credit checks in employment is not the silver bullet to reducing unemployment or solving poverty by any means. Expanding job training opportunities, investing in community programs on financial literacy and strengthening the social safety net are also critical.
But while it has not been proven that credit checks are an effective reflection of employment performance, it has been shown that banning them positively affects communities with poor credit. As such, we must push our legislators to support the Equal Employment for All Act, which would prohibit employers’ use of credit checks, and introduce greater equality into the employment process.
This article originally appeared in The Hoya on November 14, 2017.