A Credit Check for the Lunch Lady

Current and prospective school employees in Bentonville, Arkansas, may soon find their credit histories under the spotlight if a proposed policy requiring every district employee or applicant who handles money or uses a credit card to consent to a personal credit check is passed.

That includes everyone from top executives managing the district's budget to the cafeteria manager to "department heads who reserve conference and hotel rooms with district credit cards, bookkeepers, all employees who process paychecks and perhaps even district employees who volunteer in their off-hours to work at school concession stands."

It's becoming more common for employers to run credit checks on prospective employees. There is the belief that a person's credit history can indicate how he or she handles money, which translates into how he or she would handle the company's money. In this situation, the policy would also apply to existing employees.

But credit scores can be negatively impacted in a number of ways that may not necessarily show willingness or ability to pay, or indicate that the person would misuse their position to steal or embezzle funds. If they recently applied for credit, if they have fully paid off an old collection account, if they are young and haven't established a lengthy credit history, or if they use a credit card from a company that doesn't report their actual credit limit, their score will be lower. Identity theft victims may not even be aware that their credit file has been hijacked until an employer runs a check.

According to The Morning News, committee members questioned whether someone with an unfavorable credit score still could be hired or allowed to continue working for the district. Steve Potts, the executive director of Human Resources, confirmed that credit scores would be part of the hiring process and would also be considered when allowing an employee to continue in a job.

Superintendent Gary Compton stated he believed that by conducting credit checks, administrators might more easily spot mishandling of taxpayer money, or those prone to do so.

But your Credit Mama believes that credit scores are an increasingly unreliable predictor of future performance - that is clearly apparent with the current subprime meltdown. Eight out of 10 credit reports contain errors. Imagine if your work product was only correct 20% of the time! Yet our society is using this seriously flawed data to make major decisions that impact our lives.

The Bentonville School Board Policy Committee is due to review this measure at next month's meeting.