Apart from the many challenges a job seeker has to go through (Competition, Education, Experience and the long list of qualifications), the background check is among the biggest obstacle that often keeps one from getting his dream job. Court Judgments, Accounts in Collection, Bankruptcy, High debt and Foreclosure are among the things that raise a red flag to Employers who are screening applicants for their company. With the many firms now also looking at one’s credit records, looks like the Credit Checks is another addition, and one of the biggest hurdle, for job seekers.

Looks like your poor credit history could not only cause your loan applications from being turned down instantly, it could also cost you a job. An increasing number of employers are using credit checks to screen potential job applicants, which means that falling behind your bills could keep you from getting hired. According to a survey by the Society for Human Resource Management, 60% of employers are using credit checks when filling at least some of their openings. Only 35% reported checking credit in a 2003 survey, and only about 13% did so 1996.

Why they do it? Many firm believe that running credit checks is helpful to their employment process as such gives them details about accounts in collection, debt levels, bankruptcies and other problems that would cast doubt on someone’s ability to handle responsibility. Employers have adopted this method as a proxy for character reference, believing it reflects on people’s ability to handle responsibility (especially on the financial aspect).

However, for many job-seekers, the practice puts candidates in a position of being unfairly judged by the circumstances of their private lives. Many other arguments have been raised over the use of credit reports. The national conversation on the relevance and fairness of credit reports for employment had been brought up. Many argue that a credit history has no relationship to the ability to perform the job and in fact can result in unlawful discrimination. In addition, credit reports are criticized for being inaccurate. There are many applicants whose financial situation has been severely impacted by the recession, and with this kind of implementation by many companies, are victimized again when a credit report makes it even harder for them to get a job. Among the recommendations raised is that credit reports should be reserved only for positions where there is a clear business justification, and to keep in mind that credit reports may contain information that is incorrect or not relevant to the job.

Help is on the Way

If you’re unemployed and suffering from bad credit, a growing number of states’ lawmakers want to remove one barrier between you and a new job: a credit check. So far, several states have imposed limitation of employers’ use of credit information in employment: Hawaii, Oregon and Washington. Washington enacted its legislation in 2007, Hawaii in 2009, and Oregon in 2010. The laws they passed would make it illegal for employers to access credit history unless they can show that it’s relevant to a job’s duties, such as handling money or having access to customers’ financial information.

Bills have been introduced in 16 other states and the District of Columbia, and Federal legislation is currently pending in Congress. There is a list (Use of Credit Information in Employment 2010 Legislation) of legislations introduced to every state during the 2010 legislative session relating to the use of credit information in employment. Expectedly, businesses have pushed back hard against such laws.

If you’re one of the employers who is running credit checks on your applicants, this article might be worth the read.