MODULE 37: Job Applicants and Credit Reports
Core Module Issues:
• Should companies check applicants’ or employees’ credit scores?
• If so, at what point should applicants be excluded from consideration,
or employees be fired, because of their credit scores?
Module Teaching Notes
As the unit winds down, we’ll look at one last privacy scenario. As with the others, companies are generally
free to engage in the featured practice, although that may be acting unethically if they choose to do so.
Doing general background checks is clearly reasonable, as is calling references. If you wish (and if you are
a law-type) you may wish to present the two cases featured in the textbook’s background information. But
does a corporation cross the line if it does a credit check on an applicant.
Conventional wisdom is that if someone is not careful with his own money, he may not be careful with a
company’s money. The degree to which that is actually true is the subject of debate among researchers,
but it appears to be at least partly so. In much the same way, car insurers use general characteristics to set
rates. A 16 year old male pays MUCH more than a 40 year old female, because the teenager is statistically
much more likely to damage his car.
The scenario examines the issue. Employees and applicants are placed into categories after their credit is
checked, and the CEO must decide how to proceed.
Discussion Points for Scenario Questions
1. Should the CEO have ordered credit checks on the various categories of workers in the first
place?
Category I YES // NO
Category II YES // NO
Category III YES // NO
Category IV YES // NO
A. FOR WHICH CATEGORIES DID YOU SAY “YES”? WHY?
2. Now that she has the information, should the CEO fire the workers with the lowest scores in
the various categories?
Category I YES // NO
Category II YES // NO
Category III YES // NO
Category IV YES // NO
A. FOR WHICH CATEGORIES DID YOU SAY “YES”? WHY?
3. Is it more reasonable to start using credit checks on new applicants? For new applicants,
should a low credit score be not considered at all, be considered as one part of the overall
application, or be a deal breaker that automatically prevents someone from being considered any
further?
Category I Not Considered // Considered in Part // Deal Breaker
Category II Not Considered // Considered in Part // Deal Breaker
Category III Not Considered // Considered in Part // Deal Breaker
Category IV Not Considered // Considered in Part // Deal Breaker
A. FOR WHICH DID YOU SAY “NOT CONSIDERED”? WHY?
4. Compare two job applicants with equally poor credit scores. The first is 24 years old and is a
recent college graduate. The second is 39. As a manager, would you make different assumptions
about whether the applicants were likely to be reliable workers based on their credit reports?
Why or why not?
5. Two bills have been introduced in Congress at different points in the last decade. Neither has
passed at the time of this writing.
Proposal 1: Make ex-employers at least partially immune (exempt) from defamation lawsuits
while giving references to former employees unless they maliciously attempt to prevent the
former worker from gaining employment elsewhere.
Proposal 2: Ban companies from using credit reports for the purposes described in this module.
Would a combination of these two ideas be a reasonable proposal? Would you favor a law that
granted immunity during reference checks and banned the use of credit checks for hiring and
firing? Or would you worry that former employers would have too much leeway to block you
from gaining employment elsewhere?
A. WHAT DO YOU THINK OF PROPOSAL 1?