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Checking the credit histories of job applicants—a common practice among employers—is coming under fire.

Four states have passed laws in the past three years that limit the practice, and similar bills have been introduced in 20 other states and Congress.

The issue has surfaced in the wake of the recession, which has left many unemployed workers with tattered credit.

The underlying concern is that poor credit could become a barrier to landing a job. Employers contend credit checks help them evaluate candidates and protect against fraud.

Another concern is the potential discriminatory impact on hiring. That prompted the Equal Employment Opportunity Commission to hold a hearing Wednesday to listen to testimony from advocates on both sides of the issue.

Opponents of the practice cite studies showing that African-Americans and Latinos tend to have lower credit scores. They also dispute whether credit reports are an accurate way to measure an employee's qualifications. An early 2000s study by Jerry Palmer, an Eastern Kentucky University psychology professor, showed that bad credit was a poor predictor of job performance.

"It is a practice that we believe is both harmful and unfair to American workers," Chi Chi Wu, counsel for the National Consumer Law Center, said at the EEOC hearing. The center advocates for low-income clients.

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Written by Sara Murray

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