Credit checks another obstacle for jobless

Out of work since December, Juan Ochoa was delighted when a staffing firm recently responded to his posting on Hotjobs.com 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.

“I never knew that nowadays they were going to start pulling credit checks on you even before you go for an interview,’’ said Ochoa, 46, who lost his job in December tracking inventory at a mining company in Santa Fe Springs, Calif. “Why would they need to pull a credit report? They’d need something like that if you were applying at a bank.’’

Once reserved for government jobs or payroll positions that could involve significant sums of money, credit checks are now fast, cheap, and used for all manner of work. Employers, often winnowing a big pool of job applicants in days of nearly 10 percent unemployment, view the credit check as a valuable tool for assessing someone’s judgment.

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.

“You can’t reestablish your credit if you can’t get a job, and you can’t get a job if you’ve got bad credit,’’ said Matthew W. Finkin, a law professor at the University of Illinois, who fears that the unemployed and debt-ridden could form a luckless class.

Others say that the credit check can be used to provide cover for discriminatory practices. Responding to complaints from constituents, lawmakers in a few states have recently proposed legislation that would restrict employers’ use of credit checks. While some measures languish, Hawaii has just imposed new restraints.

Business executives say that they have an obligation to be diligent and to protect themselves from employees who may be unreliable, unwise or too susceptible to temptation to steal, and that credit checks are a help.

“If I see too many negative things coming up on a credit check, it’s one of those things that raises a flag with me,’’ said Anita Orozco, director of human resources at Sonneborn, a petrochemical company based in Mahwah, N.J. She said that while bad credit alone would not be a reason to deny someone a job, it might reveal poor judgment.

“If you see a history of bad decision-making, you don’t want that decision-making overflowing into your organization,’’ she said.

More than 40 percent of employers use credit checks at least sometimes, according to a 2004 survey by the Society for Human Resource Management, up from 25 percent in 1998. The share has almost certainly risen today, say career counselors.

It is generally legal to run credit checks on job applicants, though some states have restrictions.

Courts have not been sympathetic to claims that discrimination is being cloaked in credit checks, said Angela Onwuachi-Willig, a law professor at the University of Iowa.

“Basically, the courts don’t protect against proxy discrimination,’’ she said.

Stuart J. Ishimaru, the acting chairman of the federal Equal Employment Opportunity Commission, said the commission would probably issue guidance on the proper use of credit checks. Such guidance, though nonbinding, could offer some reassurance against lawsuits to employers who comply.

“It’s something that intrigues us and worries us,’’ Ishimaru said, adding that some job-related tests had led to discrimination claims in the past. “The question is, why do you use it? How is this a good screening device?’’