Home > Credit Reports > Could Your Medical Debt Keep You From Getting a Job?

Comments 0 Comments
Advertiser Disclosure


You might think your credit report only gets looked at when you’re applying for some sort of loan. However, many are surprised that the Fair Credit Reporting Act (FCRA) allows employers to use credit reports when making hiring decisions.

A survey of a random sample of Society for Human Resource Management members found that 47% of employers used credit background checks in 2012 for job candidates.

Some employers say that credit checks allow them to judge the qualifications and character of potential employees.

Sen. Elizabeth Warren (D-Mass.) would like to change this. She has sponsored legislation — the Equal Employment for All Act, S. 1837 — that would prohibit employers from requiring potential employees to disclose their credit history as part of the job application process. The bill amends FCRA to prohibit the use of consumer credit checks against prospective and current employees for the purposes of turning a candidate down for employment — with exceptions for employment that requires national security clearance or when otherwise required by law where such information would be relevant.

Some believe that credit history can provide insight into an individual’s character, while opponents to the practice like Sen. Warren, say a credit report doesn’t tell the full story.

“A bad credit rating is far more often the result of unexpected medical costs, unemployment, economic downturns, or other bad breaks than it is a reflection on an individual’s character or abilities,” Sen. Warren said.  And she wants to stop further penalizing people for bad breaks.

For many Americans, that bad break is a medical bill going to a debt collector.

Taking a Closer Look

A national survey by the Commonwealth Fund found that 41 million working-aged adults were contacted by a collection agency about medical bills. Seven million working-aged adults reported a medical billing error resulted in the collection agency contacting them.

So what does this have to do with the Equal Employment for All Act?  A lot, since nearly all medical bills that wind up on a credit report appear there because they are sent to collection agencies. Collection agencies, not the health care providers, report these accounts to the credit bureaus.

Studies published in the Federal Reserve Bulletin have documented that nearly one-third of Americans with a credit file have a collection account on their credit report, and that more than half of accounts in collection are medical accounts.

Medical bills may end up in collection due to an error or confusion. Millions of Americans have bills sent to collection because they are uncertain about what they owe and what their health insurance covers. In the midst of this confusion, while providers and insurers fight over claims, those claims not promptly paid can be sent to collection.

When Illness or Disability Is a Factor

Research by the Commonwealth Fund has also shown the link between chronic conditions and disabilities and a greater likelihood for having medical debt problems.

Since it is common for outstanding medical bills to be sent to collection, it is likely that those with chronic conditions and disabilities are more likely to have their medical bills reported on a consumer credit report.

The federal Americans with Disabilities Act, passed nearly 25 years ago, protects the civil rights of people with disabilities. It clearly states that employers may not discriminate against qualified individuals with disabilities.  Consider then, that in cases like these, the use of employment credit checks may put such individuals at a disadvantage — something employers may also want to keep in mind before hinging a hiring decision on a credit report.

So does reviewing a credit report really help to assess the integrity and responsibility of a job applicant?  If research is any indication, it is unlikely, especially if the reason they have accounts in collection is the result of an error, or due to the fact that they have a chronic condition. For this reason, I agree with Sen. Warren — not only should employers be discouraged from using credit reports in hiring decisions, they should be prohibited from doing so. Maybe it is time for Congress to follow the lead of many states that have taken such a step. What do you think?

[Editor’s note: If you find out that a credit check will part of the screening process for a job you’ve applied for, you can prepare yourself by checking your credit reports beforehand.  If you find negative items that are errors, or even if they are correct, you can be ready to explain the items to the prospective employer ahead of time. And although employers do not see your credit scores as part of the screening process, it’s good for your own information to monitor your scores regularly, as a sudden drop may alert you to a problem on your credit reports. Credit.com’s Credit Report Card is a free resource that updates your scores and an overview of your credit profile every month.]

More on Managing Debt:

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.

Image: Marcus Clackson

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team