Credit scores were primarily invented to help lenders gauge debtors’ creditworthiness with a handy, neutral (hopefully) benchmark rather than relying on references or worse, insider dealings. It didn’t take long, however, for other parties to start using them, like landlords seeking reassurance that their tenants would pay rent on time. With employers, however, it’s different. A job is necessary for someone who has poor credit to become more creditworthy, and when jobs are scarce and pay is low, then a poor credit score can keep people out of work entirely.
The New York City Council believes credit scores shouldn’t be used that way, and on April 17th, it passed a law banning most employers from using credit scores to evaluate job candidates. The vote was a lopsided 47 to 3 in favor of the bill. Eight U.S. states forbid the practice, as does the city of Chicago.
The New York Times reported on the story, focusing on a Harlem entrepreneur who couldn’t find a job after her business failed and her credit deteriorated. According to a 2010 survey, 60 percent of the city’s employers use credit scores when hiring, even for jobs as mundane dog walkers, yet somewhat surprisingly, the bill’s proponents managed to limit the number of carve-outs, loopholes, and exceptions for employers. There is a fear that people with poor credit ratings will be fiduciary risks, stealing from the company’s accounts to repay debts, engage in fraud, go gambling, or accept bribes by third parties. As a result, there are some exceptions like for NYC police officers and fire marshals, as well as government employees whom the law requires to have some kind of security clearance. There’s also a provision for employees for “signatory authority” over third-parties’ assets that are greater than $10,000. The other nine jurisdictions banning employer credit checks aren’t nearly as strict, and some of them even permit the practice throughout their financial industries.
The New York Times article on the bill can be found here.
If people with low credit scores can find work, then that’s probably a good thing. It might help keep them out of bankruptcy. If you are encountering financial difficulties and your credit is affected as a result, then you should know that filing bankruptcy can actually boost your score. For that reason you should consult with an experienced New York bankruptcy lawyer.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy automatic stay Bruce Weiner for a free initial consultation.