Should you deny a job to someone because of a bad credit record when that bad credit was caused by them not having a job - and/or losing a job - in the first place? That's a question lawmakers at both the federal and state level have considered with bills to limit - or prohibit - the use of credit reports in the hiring process, legislation several states have already enacted.

I have a friend who is a finalist for a senior director IT position with a mid-sized firm. The hiring company has done both a background check and a credit check on him. But this is not the norm by any means.

Most credit checks are done only in connection with senior positions, as with my friend, and a survey you can read here by the Society for Human Resource Management showed that credit history ranked the lowest on a list of criteria employers typically use in making hiring decisions.

However, some 60% of employers do use pre-employment credit checks in some form or fashion for some positions.

60% of employers do use pre-employment credit checks in some form or fashion for some positions.

A Congressional bill introduced in 2009 called "H.R. 3149 Equal Employment for All Act" was an attempt at stopping people from being discriminated against because of their credit. But it didn't get out of committee after aggressive lobbying from such organizations as the U.S. Chamber of Commerce, the Consumer Data Industry Association, and the Financial Services Roundtable.

Still, as you know, under the Fair Credit Reporting Act (FCRA), businesses must obtain an employee's written consent before seeking an employee's credit report. If you decide not to hire or promote someone based on information in the credit report, you must provide a copy of the report and let the applicant know of his or her right to challenge the report under the FCRA.

There is apparently little scientific research showing a clear link between someone's personal consumer behavior and their performance on the job.

There is apparently little scientific research showing a clear link between someone's personal consumer behavior and their performance on the job.

That being said though, you do want someone working in financial services, for example, to be responsible with their own money. HR people often have access to information such as social security numbers and DOBs so it makes sense there. And also for IT professionals who similarly have access to personal and sensitive information.

But what about any number of other positions, such as office cleaners for example, who are often unsupervised, and are at work when others aren't?

There could be a tempation if the worker is having trouble paying their bills.

Suzanne Lucas spent 10 years in corporate HR, and founded the Carnival of HR, a bi-weekly gathering of HR blogs. Here are her suggestions for good laws on pre-employment credit checks:

  • Credit checks should be made after an offer has been made, not before.
  • Require companies to have written policies on how credit histories will be used.
  • Require companies to tell candidates up front if a credit check will be performed.
  • Require multiple years to be taken into consideration.
  • Let companies decide when credit checks are necessary, not lawmakers.

What do you think? Would you add anything to that list? Take anything off it? Do credit checks have their place in hiring? Do you think it's a good idea to ban them outright as several states have done? Do you think they are a recipe for discrimination?

Tags: News, Best Hiring Practices, Human Resources, Fair Credit Reporting Act, Credit reports in hiring, Fair Credit Reporting Act (FCRA), Job candidates credit history, Pre-employment credit checks