Unemployed and Taking on Debt to Stay Afloat? Don’t Expect to get a Job

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Unemployed and Taking on Debt to Stay Afloat? Don’t Expect to get a Job


There are about 14 million people unemployed in this country, and 6.2 million of them have been unemployed for more than 27 weeks. Where should they turn when they’ve lost a steady paycheck, but still have to keep up with bills such as mortgage payments, student loans, and the basics like rent and food? With no money coming in, many understandably have to turn to debt.

But taking on debt — and being unable to pay it back, or pay back any of the debt they may have took on when things looked better and they had a job — could be the exact thing that keeps the unemployed from becoming re-employed. In a massive Catch-22, many employers are looking to credit reports when they do background checks on prospective employees, and a bad mark due to an unpaid medical bill or lapsed student loan payment could make the difference in getting the job. In 2010, The Wall Street Journal reported that more employers are relying on these checks before making hires. Nothing has changed in the intervening year — except perhaps that the problem is getting worse. Marketplace recently told the story of Sarah Sholar, just one of those employees with bad credit who has been turned down by prospective employers. “I can’t pay my student loans because I don’t have a job,” she told them. “I can’t get a job because I can’t pay my student loans.”

The companies in charge of reporting on consumer credit records are extremely opaque and have little oversight. Some studies found that 25 percent of credit scores — based on credit reports — have errors in them. More than 20 million Americans may have material errors on their credit reports. And good luck trying to fix errors — or to even figure out how these scores are calculated. Both will lead you down a labyrinthine path.

But it’s not just consumers who get suckered by reporting agencies. As Amy Traub wrote in The American Prospect, “Credit checks have been aggressively marketed to employers by for-profit credit bureaus,” but “he only available rigorous study of employment credit checks concluded that there’s no correlation between credit history and job performance.” Even those who are concerned about whether to trust a new employee with fiduciary responsibilities may not learn much from a credit report when trying economic times have landed even the most responsible people in difficulty. On top of this, because African Americans and Hispanics, for a variety of reasons, disproportionately have low credit scores, they can be excluded from jobs that run credit checks, leaving the door open for discrimination charges. In fact, as Traub points out, Bank of America was found to have discriminated against African Americans in just this manner in 2010, and there’s such a case pending against Kaplan Higher Education Corporation. ................(more)

The complete piece is at: http://www.alternet.org/newsandviews/article/659580/unemployed_and_taking_on_debt_to_stay_afloat_don%E2%80%99t_expect_to_get_a_job/