Credit: It’s a double-edged sword, which can either help or hinder a young person’s financial growth in a dwindling economy.
Suppose you are in an entry-level job, hired upon graduation, with a slew of student loan bills coming in the mail.
Then there’s rent, utilities, car loans, credit cards, groceries, not to mention extracurricular expenditures.
You start paying them off, confidently, with the budget you accustomed to your entry-level salary.
Six months down the road, the company that initially seemed promising and structurally stable has to let go 20 percent of the staff: including you.
At this point, with no income, bills are paid by priority. Student loans, rent and utilities are paid first. However, the credit card payments — consisting of gas costs, groceries, home repairs, clothing and entertainment — are placed on the backburner.
You reassure yourself that these late payments are minor dings to your credit, and are a small price to pay during “hard times." After all, you plan on continuing payments again once you find another job.
One minor problem: Your credit may determine whether or not you are qualified during the job application process.
According to Adam Cohen, in TIME Magazine’s article “Should Companies Use Credit Checks to Screen Job Applicants?” there has been an alarming increase of corporate companies relying on applicants’ credit reports as a crucial component of character screening.
With higher rates of defaults on loans in the past couple of years, credit scores have suffered on not only a personal, but also a national level.
Student loan principals are steadily increasing, even outweighing credit card debt. As Mary Pilon of The Wall Street Journal reported in August 2010, “Student loans outstanding today — both federal and private — total some $829.785 billion.”
Unlike other debts that are eligible for loan forgiveness under terms of bankruptcy, government loans carry serious consequences when gone into delinquency. Such is the result in rapid decrease of scores reported by the credit bureau.
When considering that the National Conference of State Legislature reported a national average of 9.1 percent unemployment last month, these factors marry into a boiling dilemma.
While it is understandable for career fields relying solely on their employees to provide clients with financial advice backed by personal experience, an individual’s credit score does not accurately portray whether or not they can perform a job honestly and efficiently.
So if college graduates fall victim to the 9.1 percent of unemployed Americans, why should falling behind on payments to credit cards become their distinguished character trait?
It’s a no-win situation. More background checks equal longer hiring processes, which not only narrows the pool of qualified employees, but also disables financially struggling citizens striving for economic recovery.
In Jan. 1, 2012, California will become the seventh state to legally ban pre-employment credit checks, fighting the “discrimination” against equal opportunity.
Hopefully, Arizona will take after this precedent in this up-hill battle by protecting the rights of hard working, yet temporarily impoverished, citizens.
Reach the columnist at britni.adams@asu.edu
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