Use of credit reports to determine promotions or terminations

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Use of credit reports to determine promotions or terminations
2 years ago
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More companies are using credit reports to determine a potential employee's character and trustworthiness than ever before. One of the reasons is the ease of convenience for the employer. Another reason is the perceived reliability of the credit report. Increasingly, credit reports are also used within companies to determine promotions and terminations.

In the past, only higher up executives and people with jobs that dealt with money or securities were subject to credit history comparisons. Now, many companies, even factories, use an employee's credit history to determine credibility. The use of a credit report tends to take the human-factor out of a sometimes difficult decision and reduce the choice to mere numbers. It also makes it more important than ever to accept personal responsibility and keep bills up-to-date and debts to a minimum.

Controversially, the use of a credit report shows the employer the employee's credit card purchasing history. In this age of technology verses privacy, little is hidden. If a person is inclined to indulge in routinely purchasing something the employer finds repugnant, that information can cause friction, maybe even prevent a promotion.

A credit report provides the employer with a history of the employee's spending habits. Items such as mortgages, loans, credit card bills, phone and utility bills, delinquencies, liens, foreclosure and bankruptcies all appear on the credit report. Past addresses, previous jobs and other names used are on the credit report as well.

An employer is not supposed to use any information about a bankruptcy against an employee; however, delinquencies prior to the bankruptcy can be sited as cause for concern.

If an employer uses the information found on a credit report to take adverse action against an employee, such as termination, lay-off or pass over for promotion, they are required by law to follow certain rules laid out by the Fair Credit Reporting Act (FCRA).

These rules state that the employee must be given a copy of a pre-adverse action disclosure. This disclosure should include a copy of the credit report, the name, address and phone number of the credit reporting agency, and a summary that explains your rights under the FCRA. There should also be a notice explaining that the credit reporting agency is not responsible for any adverse actions for supplying the report and a notice explaining rights of dispute.

It's important to note that employees have the right to dispute the validity of any information that a credit reporting agency provides, especially if that information leads to termination. An additional copy of the credit report can be obtained for no cost from the credit reporting agency within a 60 day period.

However, disputing the information may take several months and in that time, the job may have been filled or another employee given the promotion. This emphasizes the importance of keeping close watch on credit reports and checking at least every six months for errors. In this way, any inaccuracies can be corrected early and often.

In many states, a spouse's credit history is part of the over-all credit report and can have bearing on the outcome. A married couple's finances are considered merged and financial responsibility is considered the same for both. This can be a relevant factor if the employer is using a credit report to determine eligibility for a promotion.

If an employer has two candidates for a promotion, both of them are equally prompt, dependable and qualified, one has a credit report that reflects the ability to live within his means, pay bills on time and be personally responsible, the other has a credit report that shows several high-end purchases, many recent delinquencies, and a lien. Which candidate would be the logical choice?

It can be argued that personal spending habits have nothing to do with individual job performance. Employers have too often found the opposite is true. A person, who doesn't take accountability for his personal life, is much less likely to be concerned with honesty and credibility in the work environment. An employee can appear to have all the right qualities, but the numbers might not add up.

by Beth Fields
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