Lea Shepard

Document Type



Employers’ use of credit reports to evaluate prospective job applicants has generated considerable scrutiny in the popular press and academic literature, but few proposals for reform. This Article explores three possible ways of reducing the risk of financial history discrimination in the employment setting. First, imposing inquiry limits on employers’ use of credit reports, a policy recently adopted or under consideration in the majority of states, is unlikely to be effective, since states’ inquiry limits are currently narrowly drafted and therefore advance few anti-discriminatory objectives. In addition, inquiry limits cannot prevent self-interested individuals from voluntarily revealing their credit histories and other financial history information, a shortcoming that triggers the game-theoretic “unraveling” process. Second, most attempts to improve consumers’ participatory role in employers’ evaluation processes can only superficially combat financial history discrimination, since these efforts are likely to produce unreliable information, and they may have a regressive impact. Given the limitations of these options, the Article considers to what extent a third approach—encouraging employers to use an empirically derived, statistically sound evaluation method to scrutinize applicants— can combat discrimination. Although an empirical method—an adaptation of credit scoring methodologies for use by employers—is imperfect, it can help to reduce the likelihood of implicit bias and stereotyping that is inherent in employers’ current subjective analyses of the raw data in credit reports. While antidiscrimination initiatives have traditionally focused on withholding information from decision-makers, where suppression of information is impracticable, the contrary approach may be more likely to advance sustained reform efforts.