Could Your Medical Debt Keep You From Getting a Job?

Medical Records & Stethoscope

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.'s Credit Report Card is a free resource that updates your scores and an overview of your credit profile every month.] This story is an Op/Ed contribution to and does not necessarily represent the views of the company or its affiliates.

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