College graduates who fall behind in repaying their college loans and other debts may find themselves jobless, as well. The reason: Many employers are now using credit checks to evaluate job applicants.
Banking, accounting and information technology companies, along with government agencies and police and fire departments, are especially likely to check the credit of job applicants.
“You want to make sure your employees have a clean record,” said Paul Villella, the president of HireStrategy, a Reston, Va., recruiting firm that specializes in the finance industry. “We’re under the microscope these days.”
The closer scrutiny comes as college costs are rising, along with borrowing to meet them. At the same time, weak job markets are making recruiters pickier. “They can afford to be more selective,” said Nina Prikazsky, the head of the loan division at Nellie Mae, a Braintree, Mass.-based student loan provider.
Deeper digging into applicants’ financial histories became more common after the Sept. 11 terror attacks, Prikazsky said. It’s based, she believes, on the assumption among employers that “a person’s credit history can sometimes give clues to their stability.”
At the same time, the Internet has made credit reports more accessible to employers. “It’s easier to go online, pay $10 and have a service give you a report,” said Villella, than to spend the time and money required to check an applicant’s references.
Under the 1996 Fair Credit Reporting Act, companies can review credit reports of applicants and employees only with their permission. Typically, job applications include a yes-or-no check-off box. Saying no to a credit review raises the same red flags that bad credit does.
Ayana Woodson, a recent business administration and finance graduate from Howard University in Washington, D.C., learned all this the hard way.
“There are jobs I haven’t got because of my credit,” said Woodson, 24, now carrying $25,000 in college debt and temping to make ends meet.
“I just assumed after I graduated I’d have this high paying job and I’d be able to pay it off,” she said. “It’s like a double-edged sword: I take out this loan so I can get a job, but it may be the very reason to keep me from getting a job.”
Bad credit alone isn’t disqualifying, said Jim Harris, a background checker for police and fire department applicants in Prince George’s County, a Maryland suburb of the nation’s capital. But given two equally qualified candidates who differ only in their financial situations, he said, “I would probably opt for the one with fewer debt problems.”
Some debt problems are worse than others, said Mike Cool, an executive at Acxiom, an Arkansas-based information technology and database company that has an employee screening service. Medical and tuition debts matter far less, he said, than “if the debt is $5,000 on a MasterCard that they used to buy beer and have fun.”
According to a recent report by the Center for Economic and Policy Research in Washington, D.C., the average student loan debt among graduates in the 1999-2000 school year was 85 percent higher than that of 1989-1990 graduates. After adjusting for inflation, it was $15,100 in 1999-2000 versus $8,200 in 1989-90. Students from low-income families owed the most throughout the decade, but debt for students from high-income families rose the most.
We’re burdening youth in a way we haven’t historically,” said Heather Boushey, the report’s author.
Harris, the Prince George’s County background investigator, worried that college graduates bank too much on their academic credentials getting them jobs while paying too little attention to lifestyle habits that could disqualify them.
“A college degree is important, but that doesn’t guarantee you anything,” he said. Getting hired these days “has a lot to do with character.”