Should employers be allowed to check job applicants’ credit reports?

I debated that question on CNBC’s Street Signs today:

Of course employers should be allowed to check applicants’ credit. Why should they look only at the biased information you put on your resume? Credit reports provide a fuller picture.

My debate opponent, consumer advocate Joe Ridout, pointed out that there aren’t any statistical studies that show a correlation between bad credit and employees who rip off their employers. But why should we need such studies? How about a little common sense, which tells you that, say, someone who is routinely late in making payments just might be late for work?

The consumer advocates’ argument rests on the assumption that businesses are irrationally discriminating against applicants with bad credit.

But if we just assume that businesses are greedy and care only about making money — which, I think, the consumer-advocate types would normally grant us — then why would they spend money on credit reports that have no value? Do “consumer advocates” really believe that they not only know what’s best for you and me, but also know what’s best for businesses’ bottom lines?

Finally, let’s not forget the people with good credit and what a great service credit reports perform for them. A clean credit report lets you carry your good reputation with you wherever you go. Because of this market innovation, it doesn’t matter if you move to a new town where you don’t know the people at the bank or at your prospective employer’s office. They can check your report and see that, to that extent, you seem to be dependable.

It would be a shame if misguided activists and pandering politicians took some of this benefit away.

(Cross-posted at the Mises Blog.)