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More on background checks

I wrote about this issue back in September here, and today there is news that several states are considering laws to limit the use of credit reports in hiring.

Supporters of such laws say they are necessary because an increasing number of employers are doing credit checks even though there is no proof that bad credit is a marker of risky employees.  They say the practice unfairly injures the huge pool of people whose credit was damaged by layoffs, medical bills or other factors beyond their control. They also say it disproportionately screens out minorities.  “Bernie Madoff had a pretty good credit score,” said Matthew Lesser, a Connecticut state representative.

The limited research on the topic seems to support the new laws.  Even a spokesman for one of the credit reporting companies acknowledges that there is no research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.

Advice to employers:  only use credit report history when there is some correlation between that information and the position in question, such as those that regularly handle money.  And only use the credit report as one factor among several in evaluating candidates.


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