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

Negotiating Visibility and Terms

[f1shlips]

I couldn't get out of it, but I negotiated who would see my credit report, why they would see it, for how long, and how it was to be destroyed after veiwing. I got everything in writing and made them sign it.

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.

Here..

[Maeryk]

It is required for any contractor on the campus.

They whacked this on us last year as "new and different".

They included, but were not limited to:

Drug testing (one time, so far, not random)
Drivers License History/driving record check. (they did that one)
Credit Check (they claim that it is due to the chance of getting a corporate credit card)
Criminal background check.
"other checks as necessary".

That one, "other" I specifically crossed out when I signed my "permission' to do those.

My Company (the contracting firm) basically said "Do it, or leave".. so no, I had no real choice. The fact that I live in an "employment at will" state doesnt help either.. means i can be fired any time for any thing.

(Course, my company also believes that I can be terminated for things on my personal computer at home if I connect to their VPN network and have as much as threatened to do so. Therefore I refuse to connect from my home PC, even if it is required by my job.. I tell em I will do it at 8:00 am the next morning when I get on-site.)

Its an ugly thing.. but I strongly suspect that you wont be able to do much about it..

I want to see mandatory drug testing for congress, with printed pass/fail results, personally.

Maeryk

BAD...Credit scores reflect frequent credit checks

[siskbc]

The problem here, beyond the obvious privacy issues, is that people can be adversely affected by credit checks. I mean, where does this stop? Currently, the more credit checks you have, the worse your credit score becomes. So, if this becomes the norm, and companies start doing this even for potential hires (as they very well may), then there are going to be some people seeing their credit rating downgraded simply because they were looking for a job. It won't make an enormous difference, maybe, but even a small difference can make a difference over the life of, say, a mortgage.

This wouldn't be so bad if getting a house didn't routinely follow getting a job...

Re:w00t

[Strange Ranger]

> Is this the kind of company you want to work for?

Yes, and more importantly, the more people who refuse to submit to this the less companies will do it. It is hard and expensive to go through stacks of resumes, find a good candidate, interview, make an offer, get it accepted, etc.

I walked out on 2 different offers for this very reason. Just the looks on their faces made it worth it. They were back to square one. And my credit was average, OK. If we all would've used our integrity a little more when it would've really counted, and said NO we wouldn't have to pull down our pants and pee in a jar to get a job today. Now its probably too late.

Do yourself and everyone else a big favor, refuse to do it. Period. And make sure the company knows why.

Employment Background Checks: A Jobseeker's Guide

[criquet]

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

Guaranteed way to pass a credit check

[scotay]

I heard on the web that this works:

1. Go for as long as you can without using your credit card before the interview.

2. Drink lots of water(1 gal) on the day of the credit check.

3. Never give them the first credit report of the morning.

4. Take B vitamins. An overly-clear credit report may set off some red flags at the lab.

** Golden Seal and Visine are said to improve your chances of passing.

I'm not sure how they expect these to work. I would think the guy that runs the reporting terminal is gonna notice you putting the drops in his eyes, but you might be able to spike his coffee cup with the golden seal

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

[rppp01]

Not only this, but what of those of us, who were laid off of high paying positions, and then took low paying jobs to survive?

I divorced a money spending person, and was given all the bills in the divorce (bad, long story I can only repeat over 10 beers or so). I was in debt bad, and handled it well until I lost my job (laid off). I did anything for work for 8 months until I landed another IT job. It paid less than 1/2 of my former pay, but is stable. My credit- horrible.

How does that reflect my character? I guess I was the asshole for divorcing, huh? (Men are seen as The Reason a marriage ended).

I agree, this should not be allowed to happen. It doesn't show your character, it shows your credit rating/history.

I think of Health Insurance. I worked for one (during my do anything for a buck days) and saw people given higher rates for having ingrown toe nails, among other things. I realized that no one could have perfect health and/or perfect credit. Why do we penalize people for being...people? Everyone gets sick, everyone has dormant diseases in them, everyone is gonna mess up on their money making decisions. Now we decide based on being human that we cannot work at certain jobs anymore?

I almost wish for the pre-computer days now. More trust then. And yes, I understand WHY, but damn it- people could miss out on a great employee because of these stupid 'checks'.

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.

Sabotaged Credit History

[AnalogDiehard]

My soon-to-be-ex-wife ruined my credit history behind my back. To make a long story short, I have $20,000 in credit card theft (marital debt and I'm stuck with it!), an identity theft alert when she was caught attempting to open another card in my name while they were trying to serve papers against her, and collection notices when she neglected the bills while she was flying around the country seeing boyfriends behind my back. This was not a happy experience and is not anything I would wish on my worst enemy. I even have to take the drastic step of applying for a new social security number because it is in her hands where she can do more damage with it.

Privacy issues aside, the danger is too great that interviewers reviewing my credit history would make the wrong assumption that I incurred all that debt and that I would lose the job offer without being given any chance to explain the report. I would simply tell the employer that my credit history has suffered severe damage from my spouse and that I have no choice but to vigorously protect that information. If they protest further I will simply state that I am not open to negotiations on that topic.

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.

are you kidding?

[brer_rabbit]

...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...

Are you kidding? The only reason I've got good credit / finances is because I steal from the company.

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

[jgerman]

Why should a single person who has never missed a payment, never been late, never screwed anyone over by not paying back borrowed money and has a 12-month nest egg that he has painstakingly assembled be treated the same as the majority of people who live pay check to pay check, overspend their income, and do not act with restraint and discipline?

Credit ratings are in fact accurate. If you have bad credit it is because you are not creditworthy or trustworthy in financial matters.

When you are applying for a loan, fine. When you are applying for a job, no you shouldn't be treated any different. More importantly, a bad credit rating does not imply that you are untrustworthy in financial matters, for starters, you don't know what the circumstances were, and secondly that's how you handled your money, not others.

Changing the terms AFTER you show up? NO WAY!

[tmoertel]

First, I am not a lawyer. If you want advice you can trust, talk to one. Now, regarding this:

On my first day, I was provided with all of the standard employment paperwork ... as well as a document that is to provide my permission for the Company to do a ... credit history check.

Let me get this straight: They sprung this condition of employment on you after you accepted the job, left your previous job, and arrived for the first day of work? That's outrageous!

If I were in your shoes, I would say no, politely and firmly:

I am sorry, but I will not agree to these new terms. We have already negotiated the terms of my employment, and these additional items were not part of our agreement. For you to attempt to change the terms now, after we had agreed upon them, and after I have left a good job with my previous employer, runs counter to established business practice and is simply unethical. As a matter of principle, I must reject these new terms.

As a courtesy to you and a sign of my good faith, I will consider the whole thing to be a simple mistake and press it no further. I trust this will be the end of the matter.

If they didn't let the issue drop, I would talk to a qualified attorney. Pursuing the matter would probably irreparably damage your relationship with your new employer. But, then again, if they really pulled something this weaselly, maybe they aren't the good employers you thought they were when you signed on.

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

[4of12]

Credit ratings are in fact accurate. If you have bad credit it is because you are not creditworthy or trustworthy in financial matters.

Credit reports are not perfectly accurate; stories abound of how bad credit reports cause people no end of hassles.

Credit reports should be treated as "a data point" on the road to assessing credit worthiness. They should be taken as only a very rough guide to indicating who will make a good employee. [I have a relative that is a phenomenally great wafer processor, but his personal finances are always about 0.13 microns away from the abyss. Poor finances; excellent employee - go figure.]

Indeed, the most creditworthy people, such as you yourself are well on your way to becoming, and such as very wealthy people without the need to avail themselves of credit frequently - have short, sketchy or nonexistent credit ratings!

You could become a victim of your own admirable fiscal responsibility in the future as your credit report shrinks to almost nothing. That could be a disaster should you ever need to borrow; but your nest egg should take care of 99% of the emergencies.

Be warned, though, that if you ever do have a change of heart about risk-pool averaging say, due to the onset of sudden kidney or liver disease requiring a $250K operation, that you won't find much sympathy among those who have heard your above-mentioned philosophy. They'll comfort you by just repeating your arguments back to your face:)

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.

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

[Dysan2k]

As an employer, I am definitely going to be assuming that this person is going to be even less careful with money that isn't is then he is with money that is. I would likely let him give an explanation, but I'm only going to take so much of a risk.

Really? And which company do you run where employee's are free to spend company money as THEY see fit? Now if it were a position of accountancy, then sure. Or CEO, CIO, COO, CTO, CFO, etc. You'd be in direct management of the company's funds, but if you are the other 96% of the company, anything that has to be purchased goes THROUGH purchasing/management, and in this case, it that's ~4% where the actual decisions are going to be made to where the money will be spent.

Personally, I put in requests for funds, but if my budget isn't going to allow it, then the money isn't going to get spent. I'm decent with personal funds, but frankly whereas you may have done well with your personal finances, others may not have been as fortunate. There are conditions WAY beyond a person's control that will force them into a financial position where they wouldn't be able to help but become endebted to someone. Examples? Get laid off, have stroke. Severance/unemployment may have been enough to cover things like mortgage, car note, and electric, but very likely would not cover the over-excessive costs of COBRA to cover medical. Now you're insurance-less and looking at a $50-100k bill. Lucky you, you're credit is slowly getting ripped apart now.

Another example? How about you're a one vehicle family and that vehicle gives up the ghost and has to be replaced? Well, if you're income is tight to begin with (and you'd be amazed how far 23k won't go), are you to suffer because your field of work doesn't provide a 60k/yr salary?

Overall, I get really irritated with credit reports in general. It usually shows that someone had financial hard-knocks at some point.

If you've got perfect credit (and there's a LOT that is required to have such, not solely on-time bill payments), then kudos for you. But if you're going to get elitest about it (one of the parent comments to the one I'm replying), then piss-the-hell off. You don't know what it's like to be forced paycheck to paycheck, and as karma goes, you'll get your lesson in it a lot sooner than later, most likely.

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

[MCZapf]

In the case of Rick (the guy who asked Slashdot), he was already hired when they tried to get him to give permission for the credit check. So, it's not really a condition for employment. It seems like they just want to know all about their employees.

IMHO, they want to know too much. It's none of the company's business. It all seems really shady to me. The only justification this company has is that everyone else went along with it. So what? Consistency? Yeah, right.

The company isn't giving Rick a loan. Rather, he's agreed to work for a paycheck. His credit history is irrelevant. The only thing that is relevant is his performance on the job.

Re:employment at will

[Anonymous Coward]

As a former employee of Fair Isaac Company (the 'F' and 'I' in FICO), I read too many horror stories about !@#$ in peoples credit scores ... made all the worse because a/ most people don't know that their credit rating has taken a hit a b/ because most of the time it is damn near impossible to fix.

As an example, if you want to screw someone over, simply run several dozen credit requests against an individual (pretty trivial exercise). That alone screws them up.

Next, you just don't know - unless you request it - what's on your record. I've been turned over to collection agencies twice - and both times the companies in question owed me money. Letters with the name of large legal firms were neccessary to get the situation resolved. And that's becuase I was aware of the issues.

One of the more frightening 'hits' people take is through their good buddies, landlords. They move, believe they have closed their utility/phone/whatever, and the landlord doesn't forward the request for the last bill. The billing companies have no forwarding address ...

For comparison, the MIB (Medical Information Bureau) is only available to a select few companies. And they have a nifty policy ... you can use the information so obtained to start an investigation of your own, but cannot rely on the information they provide alone. Like, if someone applies for life insurance, and the insurer's query returns the minor detail they've had three heart attacks in the last year. If the insurer then requests the reports from the hospitals, well and good. If they deny you based on the MIB info alone, and get caught, the fines and possible loss of access are staggering.

Unfortuantely, a similar idea for credit ratings was shot down. The companies who use these credit scores benefit in two ways by not verifying a 'bad' score - no investigation cost, and, for most of them, charging a higher interest rate.

So the industry is set up to fuck your rating, and reluctant to do anything about it. I'm with the original poster, tell the company to get stuffed. It's the old "It came from the computer, so it must be correct!" whine of people who don't want to take responsibility for a system they know is broken.