Your credit report is one of the great mysteries of personal finance. Containing a significant portion of your financial activities, the report helps create your credit score. Yet the exact formula for calculating a credit score is unknown to the public, and a wide variety of organizations can check your credit report without permission. With written consent, employers may even access a job applicant’s credit report, but several senators are seeking to end this practice.
Sen. Elizabeth Warren (D-Mass.) and six other senators recently introduced the Equal Employment for All Act. The bill would stop employers from requiring prospective employees to disclose their credit history or disqualifying applicants based on negative information found in a credit report. There are currently 10 states that already restrict employer access to certain types of jobs, but federal law allows credit checks for any employee.
“It was once thought that credit history would provide insight into someone’s character, and many companies routinely require credit reports from job applicants. But research has shown that an individual’s credit rating has little or no correlation with his ability to succeed at work,” Warren wrote in a blog post. “A bad credit rating is far more often the result of unexpected personal crisis or economic downturn than a reflection of someone’s abilities.”