Friday, February 02, 2007

Are credit checks a civil rights issue?

This is a question I had never even considered until reading the article at MSN's Money Central. The article begins with the predicament of a young black woman who was temping for Harvard University. When the position was offered as full-time, she was encouraged to apply, but a credit check nixed her from further consideration because of a bad rating. She is now suing Harvard for racial discrimination.

Let me explain the underpin of lawsuits of this kind where there is no obstensible racial motivation. A law or practice doesn't have to state that it excludes based on race for it to be biased. The court will look at whether the result of the practice unduly discriminates. In this case, I agree with the quoted financial experts that credit checks are unduly biased against minorities who may have more bad histories due to circumstances, including less income than outgo, medical debts, layoffs, or any number of life occurrences. I also agree credit checks are necessary for the following:

- For jobs handling money, people may have a motive to steal if their debts surpass their salaries.

- For jobs requiring travel, bad credit could bar applicants from renting cars or buying tickets.

- For jobs managing money, a credit report can offer clues on how applicants manage their own.

This may seem more of a class issue, because there are non-minorities who have credit troubles. But the stats show that minorities are more likely to be saddled with bad credit. And this Catch-22 of needing to have good credit to get a job with enough pay to actually pay off debt just doesn't help.

If a credit rating has no relevance to the job done, then why is it necessary? As stated in the article, if an employer wants to weed out potential employees with a prediliction for criminality, then a criminal background check is due. It can be argued that a lack of criminal record is no real predicator against future malfeasance. I would agree. But can you determine whether a Leroy Jones is more likely to steal than a Kenneth Lay or Jeffrey Skilling?

This topic hits home for me because just three years ago, I was able to purchase a home because of my above-average credit rating. Three years later, I'm unemployed an in the ensuing time, I have had medical bills and utility surges that have eaten my budget, forcing me to sometimes determine if Peter is going to get paid this month as opposed to Paul. I've been basically good about keeping up, but I have had months where I could not do my school loan payment, which even when working was a good chunk of my paycheck. So, I know my rating has dropped substantially. I'm sending out resumes for positions; question is, will I be penalized with a bad credit check report? I seriously hope not.

Labels: Racism