A growing number of states and cities are starting to buy that argument. Last month, Nevada became the 10th state—joining California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont, and Washington—to ban employers from running a credit check on a prospective hire. Nevada’s law, which goes into effect in October, allows applicants who find out their prospective employers used their credit information to deny them a job to sue the company and force it to hire them.
Eight of the states that ban the practice have done so over the past three years. Chicago also passed a law last year, though the city exempts jobs that require handling money from the new rules. The New York City Council and the New York State Legislature are both considering bills that would severely limit employers’ abilities to use credit reports to screen applicants. At the federal level, Representative Steve Cohen (D-Tenn.) introduced a billthis February that would ban employers from using both credit checks and bankruptcy filings when evaluating employees.
It’s hard to know how companies use credit reports to make decisions. The Society for Human Resource Management found that 80 percent of employers say they hired people whose credit reports contained damaging information about them. While a company must tell you whether it is checking your credit report, it doesn’t have to tell you why it turned you down for the job. The Demos study found that one in seven people were told they weren’t hired because of their credit. But because employers aren’t required to let you know why they made their decision, the actual number is presumably much larger than that.