Dealing with Employers Who Perform Credit Checks?

Rick asks: "I recently accepted a Director level position at a small, 40 person, technology company. On my first day, I was provided with all of the standard employment paperwork such as the W2, NDA, healthcare, etc., as well as a document that is to provide my permission for the Company to do a comprehensive background check on me, including a credit history check. I am now in a stalemate position with my employer in regards to this background check document. I have refused to sign on the grounds that my personal credit information is of no business to the company and that they have no basis of need. The company argument (COO level so far, CEO is next) is that the company instituted this policy over a year ago for all existing employees and new hires, and to maintain consistency, every employee must comply. The company also maintains that the information allows them to identify potential problems with candidates or employees, in that people who cannot manage their own finances may not be good employees, or that those with troublesome credit may be more likely to steal from the company. The COO used less direct terms, but ultimately that was the argument. Have Slashdot readers successfully negotiated out of a mandatory employee credit check in the past? What arguments did you use?"

Comments

Google

[SquadBoy]

is there anything it *can't* do?

http://toolkit.cch.com/text/P05_1585.asp

Re:Google

[Anonymous Coward]

You could've posted the federal side, too:
http://toolkit.cch.com/text/P05_1575.asp

Plus the text:
Federal Laws for Credit Checks

The Fair Credit Reporting Act of 1971 regulates the use of consumer credit reports as a part of background checks on applicants. Hiring is a permissible purpose to do a credit check under the law, but you must keep the results confidential and must not put the results of the check in the person's personnel file.

If the credit report shows that the person declared bankruptcy, then you also have to comply with provisions of the federal Bankruptcy Act. Under the Bankruptcy Act, you may not discriminate against an applicant solely because a credit check reveals that an applicant has sought protection under the Bankruptcy Act, been insolvent before seeking protection under the Act, and not paid a debt that is dischargeable under the Act. In other words, bankruptcy is not a valid reason to deny employment.

Disclosures you must make. You must:

* Clearly and accurately tell the applicant that an investigative consumer credit report may be made that could include information on the individual's character, reputation, personal characteristics, or mode of living.
* Make the disclosure in writing, on a separate piece of paper (not as part of your job application). Your credit reporting agency can provide you with forms to be used for this purpose.
* Mail or otherwise deliver the notice to the individual not later than three days after the date on which the report was requested.
* Include with the disclosure a statement informing the applicant of his or her rights to request disclosure of the nature and scope of the investigation required.
* Have the applicant sign the disclosure document and return it to you. Be sure to keep this in your files.
* If requested by the individual, make a complete and accurate disclosure of the nature and scope of the information sought not later than five days after the date on which the individual made the request, or five days after the investigative report was requested, whichever is later.

Business Tools

A sample Fair Credit Disclosure Act notice appears in the Business Tools area.

If you do deny employment because of something on the credit report (and remember, it must be something other than bankruptcy), you must:

* inform the job applicant that employment was denied because of the credit report investigation, even if the credit report wasn't the only reason
* furnish the individual with a copy of the credit report, along with a summary of the individual's credit rights.

The Federal Trade Commission is very specific regarding the format of the consumer credit rights notice that must be provided to an employee or applicant if adverse action is contemplated. Fortunately, federal law requires credit reporting agencies to provide a copy of this notice with each credit report. You can use this notice to fulfill your own notification responsibilities.

Yes - Negotiating this one is simple.

[Marasmus]

Yep - I've been in the same boat. A previous employer wanted to pull a credit report on me. Interestingly, I have very good credit, but I was planning on purchasing a new car soon and did not want to have unnecessary credit checks done, as some institutions like to use this as a perverse excuse to deny financing on a car.

My statement was very straightforward: "I will not sign this on the grounds that you do not have the right nor privelege to require this information for the sake of employment. If you care to push this issue further, I will schedule a court date at the County courthouse and we will deal with it there."

The employer backed off, and I worked there for nearly two years. You would have REALLY shit if you saw the sort of privacy-invading NDA employment contract they tried to require of the programmers who were hired after me... Thankfully the first programmer through the door fought that NDA until it was toned down to a sane level (at maybe 10% its original potency).

NPR Story

[tetrad]

National Public Radio had a story about this a couple days ago.

Let 'em

[Matt_Bennett]

They have the right, but, by law (in the USA) if they make a negative decision because of the credit report, they have to inform you of that. This is often overlooked. There was a report on this on NPR recently (Jan 31st, All Things Considered).

At the very least, you should check your credit report to make sure it is accurate.

Security Cleanence Credit Checks

[mrs clear plastic]

I remember when I had to apply for a security
clearence back in 1978, I had to provide a lot
of information including bank and credit
information.

They explained to me that one of the things they
look at is the potential vulurability of the
person to being given financial help in return
for some favors (secrets) and then blackmailed
with exposure.

I also think they look carefully at all of
the information; credit history included; to
try to make certain that the person is not a
plant; that he or she did live a legitimate life
here in the United States.

Mark

Employment Background Checks: A Jobseeker's Guide

[criquet]

http://www.privacyrights.org/fs/fs16-bck.htm

Nolo Link on the subject

[doonesbury]

Here's an article on Nolo. Here's the relevant portion:

Credit reports. Under the Fair Credit Reporting Act or FCRA (15 U.S.C. 1681), employers must get an employee's written consent before seeking that employee's credit report. Many employers routinely include a request for such consent in their employment applications. If you decide not to hire or promote someone based on information in the credit report, you must give the person a copy of the report and tell them of their right to challenge the report under the FCRA. Some states have more stringent rules limiting the use of credit reports.

Re:Credit checks do NOT lower your credit score

[siskbc]

A check is neutral. Where did you get this bad information? Negative scores only come from late payments, large open debts, and extended dillenquencies.

I got this "bad information" here among other places. Here's a link to a shorter explanation from the Fair&Isaac website, the people who make the credit score and provide them to Transunion, Equifax, etc.

Sorry, but 10% of your credit score is how many credit checks you've had in the last year. It's not at ALL neutral, unless you're the one checking. If someone told you that, they were misinformed. Here's an excerpt from the site I linked to...

# 35% of the score is based on your payment history. This makes sense since one of the primary reasons a lender wants to see the score is to find out if (and how timely) you pay your bills. The score is affected by how many bills have been paid late, how many were sent out for collection, any bankruptcies, etc. When these things happened also comes into play. The more recent, the worse it will be for your overall score.

# 30% of the score is based on outstanding debt. How much do you owe on car or home loans? How many credit cards do you have that are at their credit limits? The more cards you have at their limits, the lower your score will be. The rule of thumb is to keep your card balances at 30% or less of their limits.

# 15% of the score is based on the length of time you've had credit. The longer you've had established credit, the better it is for your overall credit score. Why? Because more information about your past payment history gives a more accurate prediction of your future actions.

#10% of the score is based on the number of inquiries on your report. If you've applied for a lot of credit cards or loans, you will have a lot of inquiries on your credit report. These are bad for your score because they indicate that you may be in some kind of financial trouble or may be taking on a lot of debt (even if you haven't used the cards or gotten the loans). The more recent these inquiries are, the worse for your credit score. FICO scores only count inquiries from the past year.

# 10% of the score is based on the types of credit you currently have. The number of loans and available credit from credit cards you have makes a difference. There is no magic number or combination of types of accounts that you shouldn't have. These actually come more into play if there isn't as much other information on your credit report on which to base the score.

Re:the reverse is unthinkable

[JohnFluxx]

My dad was the head of a union of a very large company. He successfully beat back the management time after time, and rarely lost.

One piece of advice he gave me was to never say no.

If they ask for a drug test, do not just say no. If you do, then you are being uncoopperative, and they can leverage that against you.

The trick is to say sure you will, in return for X, where X is something that sounds reasonable, but that they cannot meet. Alternatively make X something that protects higher interests.

Whether you agree with unions etc, I cannot deny my dad was very good at it - so I take his advice seriously.

Re:You've got to be kidding me....

[KaptajnKold]

I can tell that you're an american. In truth this seems like a discussion that concerns mostly americans. While I agree with some of your points, most of what you say seem rather alien to me. I live in the EU where most countries either has been or are currently being governed by social democrats. We've got this idea called solidarity. This is the idea that even though we're different we should all try to pull together. As a consequence most european countries have free healthcare. The only people in Denmark (where I come from) I know of that would ever consider paying for health treatments are profesional sportspeople who need to be ready in the shortest possible amount of time and so will pay to go to a private clinic or hospital (of which there are very few).

You seem to think that people who are "perfect" shouldn't be punished for others imperfections. We believe that if at all possible people shouldn't be punished for their imperfections either, since it is precious few who are indeed perfect.

I will finish by mentioning that inquirering about an employees credit history is I believe illegal in Denmark. And I know for sure that to some extent it is even illegal to ask for an employees criminal record (although for many kinds of jobs it is standard and legal).

Re:BAD...Credit scores reflect frequent credit che

[riaasucks]

There's alot of half truths being bantered about. For the best info on credit, you need to go to Creditnet.

That being said, inquiries (or checks) on your credit fall into two distinct categories: hard and soft.

Hard inquiries are inquiries that are initiated per your attempt to aquire credit, usually applying for new credit, sometimes by requesting credit limit increases. These stay on your reports for two years and do indeed knock a few points off of your FICO score per inquiry. The FICO formula only pays attention to hard inquiries in the past six months...anything older is not factored into your FICO score, but a creditor may still use it for approval decisions. Multiple inquiries in a one month period while shopping for auto or mortgagee loans are treated by FICO as a single inquiry.

Soft inquiries are inquiries that can be created by viewing your own credit report, a current creditor doing an account review, employer checks and those nice unsolicited preapproval letters you get from credit card companies. These inquiries also stay on your report for two years, but they are ONLY viewed by you and have NO effect whatsoever on your credit score.

Agree, an example...

[Anonymous Coward]

My current company wants me to sign an IP agreement - fine I say, I'll be happy to sign an agreement not to disclose any proprietary information as long as you take out the portion that says any "works" created by myself, at any time during employment, belong to the company - I only want works created on company time and/or using company equipment to be owned by my employer. Very reasonable, I think...

Every time they ask me to sign the document, I send the same questions back to them, they say "we'll ask the lawyers", and I don't hear from them for a year.