By Linda Carroll
Employers who use credit scores in their hiring decisions might be weeding out some of the best applicants, a new study suggests.
Researchers found no connection between poor credit scores and the likelihood that an employee would steal or call in sick. But they did find a correlation between lower credit scores and a more agreeable personality, according to the study which was published in the Journal of Applied Psychology.
Why should employers care about agreeableness?
“More and more companies have team-based structures,” said study’s lead author, Jeremy Bernerth, an assistant professor at Louisiana State University’s E.J. Ourso College of Business. “And in a team-based environment, this is a necessary component for any team member.”
Some 60 percent of companies now use credit scores when they make hiring decisions, but nobody really knows what these scores tell us about potential employees, the researchers pointed out.
“Practitioners say it’s a measure of all kinds of things — integrity, personality, intelligence — and we wanted to figure out what it really represents, if anything,” Bernerth said.
So he and his colleagues rounded up 142 volunteers who were willing to take a personality test, supply a credit score, and allow the researchers to question supervisors about job performance.
As it turns out, people with poor credit scores were no more likely to steal or display any other type of deviant work behaviors, Bernerth said. They were, however, more likely to have easy going personalities.
The bottom line, Bernerth said, is that employers are using a score that may indicate nothing — or something completely different from what they expect.
“You have to be a little cautious using credit scores,” Bernerth said. “You have to be aware that there are lots of things that adversely impact them.”
Employers also need to understand that minorities tend to score lower than others, said Madeline Neighly, a staff attorney with the National Employment Law Project.
Beyond that, many people these days who were prompt with payments for years now have bad credit because of the tough economy. They’re in a “Catch-22,” Neighly said.
“You lose your job and your credit tanks,” she explained. “And then you can’t find a job because your credit is bad.”
Employer’s use of credit scores can be especially bad news for the young.
“A recent college graduate might have done everything right, worked his tail off, paid for everything in cash, not used credit cards or taken out any loans, and his score will be adversely impacted, because there isn’t much credit history,” Bernerth said.