Does bad credit make you a bad employee?

courtesy flickr user Andres Rueda

According to a 2010 poll by the Society for Human Resources Management, 60% of employers conduct credit checks as a routine part of the hiring process. I find this a little spooky. After all, what's more likely: That a new employee is going to totally make a hash of his or her boss's life, or that it'll work the other way around?

A group of researchers from Louisiana State University, Northern Illinois University and Texas Tech University took a more scientific view of the issue: They set out to see if credit scores really had anything to do with employee performance. At first glance, the answer appears to be no: The researchers had access to both credit scores and performance reviews of a group of employees, and found that credit scores didn't predict job performance.

Still, don't count on many employers giving up the practice of using credit as a tool to screen job applicants: The researchers also found that credit scores were correlated with certain personality traits--traits that employers care about.

The researchers looked at a number of factors that might affect employee performance. They administered personality tests, got credit scores from Fair Isaac Corp., and collected performance data from employers. The credit scores the researchers got from Fair Isaac were much more detailed than the more general credit reports most employers are able to grab.

Overall, the researchers found that workplace performance and credit scores did not appear to be linked. They also failed to find a link between so-called "workplace deviance" and poor credit. That's important, because employers often claim they check applicants' credit because they're worried about theft.

What your credit score says about you

Here are the traits that did seem to be linked to credit scores:

Conscientiousness: Employers care about this one. And employees with higher credit scores tended to also score higher on conscientiousness on the personality test.

Loyalty: Workers with higher credit scores scored higher on a scale of "organizational citizenship," and were more likely to show loyalty to their employers.

Agreeableness: Nope, people with higher credit scores are not nicer. It's the other way around. People with higher credit scores actually turned out to be less agreeable--again, as determined by personality tests they took--than people with lower credit scores. The researchers think this might be because 'nice' people are more likely to co-sign loans for their less credit-worthy friends or relations, and may even be more susceptible to sales clerks trying to get them to sign up for credit cards.

The study is slated to appear soon in the Journal of Applied Psychology.

Do you think it's fair for employers to check credit scores before making a job offer? What information would you like to have about a new workplace before coming on board?

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    Kimberly Weisul is the co-founder of One Thing New, the free email newsletter for smart, busy women. She was previously Senior Editor at BusinessWeek, responsible for all coverage of entrepreneurship and for launching BusinessWeek SmallBiz, a bimonthly magazine. She is also a freelance writer, editor and editorial consultant.

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