Another cause of unemployment: poor credit histories

As if the times are not tough enough for many, there is another thing that is making it worse for others: poor credit histories.  The New York Times is running a story about the use of credit histories as a means to sift through the numerous job applications – setting aside those who might not necessarily be unqualified but simply have made bad decisions in the past, which affected their credit standing.

Out of work since December, Juan Ochoa was delighted when a staffing firm recently responded to his posting on with an opening for a data entry clerk. Before he could do much more, though, the firm checked his credit history.

The interest vanished. There were too many collections claims against him, the firm said.

Financial death spiral is one observation that makes this a scarier trend.

But job counselors worry that the practice of shunning those with poor credit may be unfair and trap the unemployed — who may be battling foreclosure, living off credit cards and confronting personal bankruptcy — in a financial death spiral: the worse their debts, the harder it is to get a job to pay them off.

And this is a fairly strong point that we cannot simply ignore. (See the story HERE.)

The report also cites already existing legislations in some states that protect some from being disqualified just because of bad credit history.  While the number of employers using this method is not (yet) an alarming number, it might be wise to already sponsor a legislation that would put an end to this practice at once.  This is one of the rare moments that I view regulation as a good thing.  It is unacceptable for one’s credit standing to be used as a tool against a person, unless his decisions significantly affect the operations of the employer.  And this is not even a regular occurrence.

Credit histories are that – a story of decisions made by one person who may or may not have had a choice when the decisions were made.  Just as an uneducated person cannot be simply reduced to an incompetent bastard, without finding out that the family was financially challenged that the student had to leave school indefinitely.


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