With the start of a new year, many people who have been financially strapped and looking for work may have just been given a new advantage. Effective on January 1, employers have been banned by the State of California from using credit checks to decide who to hire, making the practice employment discrimination.

In the past employers were allowed to use credit checks on potential new hires, to decide whether to hire the person. Credit checks contain important financial history information, including how regularly you make payments on certain debts. Many people may not have even conducted a credit check on their own, so they might not be aware of mistakes in the report that could adversely affect their job search.

Employers sometimes think that a person’s financial history is an indication of their character. Unfortunately, credit checks reflect financial hardships that are no fault of the person such as those caused by an unforeseen medical issue or divorce. An unavoidable hospital stay that causes a person to get behind on their bills shouldn’t lead to them not getting a job.

This new California law will allow people to apply for jobs without employment discrimination toward their financial history. There are a few exceptions to the law. People can still have credit checks required if the job they are applying for involves sensitive material such as bank, credit card or social security numbers, as well as some government positions. California is now the seventh state to make credit checks as part of employment screening illegal.

Source: WHEC, “Some states working to block companies from checking credit scores of prospective employees,” Jan. 3, 2012