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Will Your Credit Report Disqualify You For a Job?
coondoggie writes "Two companies that fired workers and rejected job applicants based on background checks, without informing those people of their rights, have settled with the FTC for $77,000 in civil penalties. Most experts we talked to think this case is just the tip of the iceberg. The companies — Quality Terminal Services and Rail Terminal Services — were charged with violating provisions of the Fair Credit Reporting Act, which requires employers to get permission to look at individual credit reports. If you don't get a job because of information in your report, the employer must show you the report and tell you how to get a copy from the consumer reporting company. There is no charge for the report if you request it within 60 days of getting notice that you did not get a job."
IMO, unless you work directly with cash or are in a position where fraud would be easy, employers have no right to that information.
Shit happens in peoples lives leaving them in precarious positions and things dont get paid on time. Having employers deny applicants based on their credit could put people in a downward financial spiral.
You can't legislate goodness. Let each to his own destiny, by will of his freely made choices.
The whole idea behind credit reports being used for anything other than whether or not you should be extended credit leaves me sickened. I've known too many hard working people who've had tough times for legitimate reasons who have been horribly screwed by this crap. Even the government mandated free credit reports are kind of bizarre, I had to forcibly tell these scum to cancel an account at one of the "bureaus" three times over the phone for an apparently ongoing reporting service that I didn't have a way to op out of and I still didn't get all the charges back.
As a former employee of a notable product safety testing company, I understand this complaint completely. However, I believe the potential for honest, hard working people to be unjustly denied a position outweighs the benefits.
Unless someone is in a managerial position or deals with money directly(credit card processors for instance), employers have no right to my credit information. Given how notoriously difficult it is to clean up a credit report, its unfair.
You can't legislate goodness. Let each to his own destiny, by will of his freely made choices.
Let's see. An investment firm is refusing to invest in you because you wasted money on parking tickets instead of investing a little and gotten a parking space.
2001 wasn't 1998, you know.
No, it doesn't make sense to check the employee's credit. Rather, you should be asking: why the hell are confidential reports being stored in an unsupervised, unsecured location?
-1 disagree is not a modifier for a reason. -1 troll, flaimbait, redundant, overrated are NOT acceptable substitutes.
The tickets were from the '90s, and the firm that has employed me for the last six years has ~$3B under investment (including some from Allen personally).
Credit reports are a stupid way to evaluate a worker, especially a programmer.
busy, busy, busy
Most of what companies do makes sense to no one but them. A company is not a single entity, even, but a whole group of idiots with different priorities and different ideas of how to do things, who probably don't talk with each other all that often, and even less often actually agree.
A previous employer shipped their entire business, hundreds of thousands of dollars worth of electronics equipment, all over the world in reusable plastic boxes with the companies name on them, sealed with velcro. Every time, at least a half a dozen people who were not their employees handled the boxes and had access to everything in them. They still did credit checks on potential employees.
In the IT industry especially, companies are fine with treating local employees like criminals, but then are more than willing to outsource essential work to god-knows-who in skeezy third-world countries.
Not trusting random people on the street is one thing. But not trusting employees is the sign of a ridiculous, horrible company.
"I assumed blithely that there were no elves out there in the darkness"
The problem with credit rating is not that it exists, or that it lacks sufficient predictive value for creditworthiness. It's that over the last few decades, credit rating has increasingly become a proxy for overall responsibility and our legal system has upheld its widespread misuse. Credit score is now a prerequisite for nearly everything that has to do with money. Your insurance premiums are a function of your credit score. Your ability to secure a job is dependent on your credit score. Whether a landlord will rent to you depends on your credit score. Just about anyone these days asks you for permission to peek at your score--even your mobile phone provider.
Credit rating was never meant to be used in this way. And yet, everyone does it because it works, and nobody is willing to stand up to it. The future of credit rating is that it will begin to use increasingly sophisticated methods to quantify how much risk you present to a lender, and on the flip side of the coin, it will be used to determine whether you can do ANYTHING. What jobs you are allowed to hold, which people you will be allowed to socialize with, what goods and services you are allowed to buy, which schools you will be allowed to attend, how many children you will be allowed to have, and where and when you will be able to travel.
Creditworthiness is the new class system. What else did anybody expect in a capitalist, consumer-driven society? This is merely the logical conclusion of a set of conditions on a system. Your entire worth as an individual will be quantified and reduced to a single number, and you will be completely under the control of powerful financial entities that sees society as a source of passive income.
The dirty little secret is that credit rating is a system imposed by the rich elite onto the working class. The rich do not have credit, because they have no need for it. Everything they could want, they simply buy. And they buy it with money that the working class earns as a result of real work, but gets funneled to them through--guess what--credit.
You misunderstand the point I have made.
The problem is not simply that the working class must borrow from the rich. It is not that in a capitalist society, the working class, by definition, requires others to lend them money to make purchases on goods and services that they cannot buy outright. The problem is that there is no counteracting force--that is to say, the rich have all the power to rewrite the rules of the game as they see fit, and thus there is no real accountability for their misdeeds.
I find it curious that you believe that my statement was anti-capitalist. To the contrary, if you apply my statement to the current economic crisis which was in no small part due to the willful underwriting of bad risks, you will clearly see that the problem is that the financial institutions have become so large and influential that the government bailed them out to prevent a complete collapse of the economy. Had the system been truly capitalist, these lenders would have had to write down their losses, rather than being rewarded by taxpayers for making bets they knew were unwise.
Capitalism when times are good and socialism when times are bad is neither capitalism nor socialism. It's simply robbery.
The credit rating problem is only one facet of the larger issue, which is that our economic system is based upon a belief that it is possible to create a sufficiently accurate quantitative model of risk such that one can "almost always" trust it. When viewed in this larger context, it becomes obvious that the trend towards more data collection, more intrusion into consumer behaviors, is the logical consequence of this flawed belief. It is this idea that the more you know about something, the more predictive you can be--but the fundamental truth remains that there is no way to eliminate risk entirely.
The working class are simultaneously victims and perpetrators of this system based upon flawed assumptions, as are the rich. But I am more inclined to blame the rich because they are the ones who have historically been in control, both financially and politically.
The lending of money, in of itself, is not a bad thing. But when mixed with an easily cowed, manipulated, and self-entitled public that is told from infancy that "you can do anything if you just try hard enough" and "you are special and deserve everything," it becomes a problem. But in whose interest is it to make a credit-based, consumer economy the foundation of the American financial system in the first place? Who do you blame--the ones who are too stupid to behave responsibly, or the ones who encourage them to be stupid in the first place, because it makes them easy to control and profit off them?
I have one - what about the people who have no credit history? They're ultra responsible, right?
The can't get any loans or any jobs that require a credit history.
Having no credit history is worse than having bad credit. Is that a fucked up system or what? Things that require a credit rating: credit cards: can't fly, rent a hotel room, or rent a car without one; many jobs; utilities; cell phones; student loans; car loans (yeah, just try and live without a car in the US) - there's more but I can't remember them.
In other words, if you want a life, you have to have a credit history and that means you have to be in debt.
Our system has evolved into making us take on debt. We're really fucked up in this country.
I worked in Downtown Seattle for 14 years, ending a few months ago. Never got a parking ticket. Take the bus, or a bike, Señor Mantecapo.
..another way: To find employees who have just enough debt to make sure they'll take any kind of s**t from their boss to keep their job and stay afloat.
Then honestly you know strange people.
It seems a quite lot of you think that most bankruptcies are just tough luck. From my experience, living in the "ghetto" of north-side Minneapolis and the like, the people worst off are usually that way for a reason. As in they buy things they can't afford. They just love to buy things, but never school supplies for their kids interestingly enough. I remember back in highschool, I had a surreal conversation with someone about how he couldn't buy the required graphing calculator. It was too expensive! And of course he was going to go spend a couple hundred dollars on clothes that weekend...
Granted I come from a responsible extended family, so none of us are in debt, and we have a huge safety net because of this, so we are lucky we will never live on the streets because of bad luck.
If you use credit, and that means getting a loan in almost any form, having a credit card, etc, you will have a credit report. What happens is the companies who loan you money or extend you a line of credit report your payment history to the three credit reporting agencies. The information reported is pretty basic, more or less all they say is if you pay on time or not. These companies then keep a file of your info.
So if you never use credit, you won't have a credit history. However, that doesn't really help you. The reason is that having no credit is usually categorized as high risk. Statistically speaking, people with no credit later in life (everyone has no credit early in life) are a credit risk.
That is what the whole thing was designed for: Evaluation of financial risk. The question every lender has is "If I loan this guy money, how likely is it I'll get paid back?" Turns out evaluating their past history is a real good indicator. In terms of the FICO scores, which is the calculation done on your history that most people think of when they think of a credit check, it neatly maps. The lower your FICO score, the higher your risk of default. You can have a look at Prosper's data for some insight in to this. Their ratings don't map to credit scores precisely, but it is similar (http://www.prosper.com/invest/performance.aspx). Note that in the AA category they have about 1% charge offs, meaning loans that defaulted. For people who have no credit it is over 60%.
Thus why it is used to decide if a company wishes to make you a loan, and what rate they wish to charge if they do. If you are very low risk, you get a good rate, if you are high risk, you get a high rate. The more likely you are to default on the debt, the more interest they want to make it worth their while.
There is really no reason to try to avoid having a credit history. All it will do is put you in a high risk category. That doesn't mean you have to go in to debt, just that you need to have credit. People online confuse that a LOT. Having good credit means that you use your credit reasonably. Having credit cards and not using them at all gives you good credit. Won't give you the max score, but it'll be good. Using cards and paying them in full each month gives you good credit. It is NOT a rating of debt, it is a rating of risk. If you have credit, don't make much use of it, and thus always pay it on time, you are a low risk. Shows lenders that you are able to manage your credit. That's what they are interested in.
So you are perfectly free to never go in to debt (though that's difficult if you want to buy a house) and still have good credit. You'll only have bad credit if you misuse it.
Now as it applies to jobs, well it is rather stupid that they check it. As I said, credit is a measure of risk of repayment of loans, nothing else. Doesn't show if you are a trustworthy person, doesn't show if you will do your job well, etc. As such it isn't something employers should be using, it isn't giving them any relevant information. It has a very narrow application.
However, in the field for which it was designed, it works well. You find out someone's credit score, and their debt-to-income ratio, and weigh that against teh amount and type of loan you are making, you have a real good idea how likely they are to repay you.
However, it is complete bullshit when deciding whether this man should manage your email server.
I think a better comparison would have been "deciding whether this man should clean the toilets in the bathroom". Managing an email server would actually give you access to quite a bit of important information.
Giant corporations declare bankruptcy, keep on operating, shed all their debt, and emerge from bankruptcy freed of all their debt, and just keeping doing business as usual. Sure, they may have the "bad credit" that a bankruptcy brings, but how does that really hurt them? Not like bad credit seems to hurt an individual. How would you know if you didn't get a job because of your credit? They don't have to give a reason why they didn't hire someone, do they?
Gattaca will arrive in a much more subtle way than Hollywood's portrayal.
http://www.imdb.com/title/tt0119177/
In our large, socially disconnected and hurry up society, using a universal method like a credit report as a background check is a great way to mitigate risk.
we have become horribly risk averse. when the only thing being measured is number of failures, the bureaucracy will do everything possible to remove the risk of failure. Thus, if you have the wrong DNA, or the wrong credit number, you are not worth the risk.
No matter what you say.
gak out