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Why We Should Rethink Credit Checks for Job Candidates

By  Arun Baheti and 
Caitlin Adams
February 3, 2022
Credit Score Concept on Laptop.
Getty Images

Like many grant makers, the California Wellness Foundation strives to prioritize diversity, equity, and inclusion. We view our DEI efforts as a journey and continually look for opportunities to improve and to better represent the communities we serve. Sometimes, however, we misstep and realize just how much longer our journey will be.

For example, in fall 2020 we advertised a job opening for a program director and received an overwhelming response from qualified, diverse applicants. Our HR department’s focus on skills vs. degrees and improved outreach had worked; we were excited.

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Like many grant makers, the California Wellness Foundation strives to prioritize diversity, equity, and inclusion. We view our DEI efforts as a journey and continually look for opportunities to improve and to better represent the communities we serve. Sometimes, however, we misstep and realize just how much longer our journey will be.

For example, in fall 2020 we advertised a job opening for a program director and received an overwhelming response from qualified, diverse applicants. Our HR department’s focus on skills vs. degrees and improved outreach had worked; we were excited.

But then we received an email from someone who declined to apply because the process included a credit check — our standard practice at the time when hiring for senior roles — which, she said, put our commitment to DEI in question.

She explained that her credit score was low in part from a bankruptcy caused by medical debt. As a Black woman with an advanced degree, she expressed disappointment that this temporary situation was overshadowing her academic and professional qualifications and lived experiences.

Despite her achievements, we then realized, a lack of wealth and a low credit score was hampering her career and, perversely, limiting job opportunities that could enable her to raise her credit score.

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Her comments stung, but her honesty and direct challenge caused us to rethink our practices. We gathered to discuss our policy and the perceived value of a high credit score. The standard thinking is that a low score may indicate poor judgment, financial desperation, or the risk that someone would steal or embezzle. Yet real-world results seem at odds with these warnings.

Eric Rosenberg of the consumer-credit-reporting giant TransUnion admits the company does not have “research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”

Plus, we easily came up with a list of reasons why someone might have a low credit score: divorce, a layoff, childcare costs, doctor bills, and other unwelcome events. We understood that these disruptions have a greater impact on women, people of color, disabled individuals, and those with a low income. We even discovered that some of our current top performers on staff were questioned about their credit reports before they were hired.

Positive Change on the Horizon


The practice of including good credit as a qualification for employment may be waning. In California, for example, credit checks can be conducted only on applicants for managerial positions or for jobs that involve certain types of financial data and transactions. At least 10 states now restrict the practice, and the Equal Employment Opportunity Commission has won cases against employers who use credit checks to disproportionately disqualify people of color for jobs.

The leading causes of bankruptcy and low credit scores are medical debt and loss of employment, especially during the Covid-19 recession. These causes don’t represent moral or ethical failings; neither do they indicate a higher risk of criminal behavior. They represent people who are struggling to climb back up the economic ladder. Denying them access to jobs is wrong, and doing so denies nonprofits the diversity we cherish and the talent we need.

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Charitable organizations have a responsibility to be the change we want to see in the world, and foundations should be leading the charge to stop using credit as a criterion for hiring. Credit scores don’t convey people’s stories or potential, their gifts, the barriers they’ve overcome, or any risks they may pose.

Using credit checks to manage risk can even serve as a cover for perpetuating discrimination and exclusion. The think tank Demos studied the practice and issued the report “Discredited: How Employment Credit Checks Keep Qualified Workers Out of a Job,” which concludes that making hiring decisions based on credit data reproduces and spreads racial inequality and hampers economic equity.

Restricting the pool of job applicants to those with good credit scores is unfair to job seekers and a betrayal of our missions. With the backing of our board, we have stopped using credit checks as part of the hiring process.

We are confident this decision will not increase our risk, but that it will broaden our pool of applicants and fulfill our commitment to advancing the health, safety, and resilience of the communities we serve. We are grateful someone had the courage to call us to account and show us the next step of our DEI journey. We hope you’ll join us.

A version of this article appeared in the April 1, 2022, issue.
We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication.
Executive LeadershipHiring and RecruitingWork and CareersDiversity, Equity, and Inclusion
Arun Baheti
Arun Baheti is Vice President of Operations at The California Wellness Foundation.
Caitlin Adams
Caitlin Adams is Senior Director of Human Resources at The California Wellness Foundation.
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