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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."
Your credit report might disqualify you from posting on Slashdot.
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.
In this economy, there are literally dozens of out of work people applying for just about every opening. Assuming you were turned down for a position, how would you ever know that the reason was due to a background check? Maybe you smell bad or your facial hair is unkempt. Maybe your fingers were stained orange from the Cheetos you eat all day long in your mom's basement. It could have been your broken flip-flops or the raggedy jeans you haven't washed since January. It's possible that the interviewer was put off by your labored breathing and the whistling sound from your nose. I'd bet the abundance of nose hairs was also a factor. While perfectly natural, it probably wasn't the best idea to let loose a SBD in the interview. Shampooing with RID or conditioning with Nix might have kept those jumping lice to a minimum. Finally, ranting about the GPL and Open Source might be friendly banter here on Slashdot, the interviewer was probably asking about the festering open sore on your leg.
It reminds me of people who send random requests under the FOIA. Sure, there is a chance that you may hit on something, but without any actual evidence, how could you ever really know whether there is something there?
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.
This has been going on for a long time. In 2001, Vulcan (Paul Allen's company) withdrew an offer because I had too many parking tickets (~$1000) on my credit report (parking tickets are a fact of life if you work in downtown Seattle). Paying the tickets wasn't enough, and the offer was withdrawn.
busy, busy, busy
This is a slippery slope you're walking. Assuming that you want to demand that employers have concrete reasons to deny you a job, you must give them access to your medical history as well as the history of your family? Sure, they can't deny you because they can only show a correlation between bad credit and bad job performance, but then should they be able to dig deeper into the reason for your bad credit?
If you are going to prevent them from accessing personal information, where does this stop? Can they request job performance information from your previous employers? Should they even be able to ask you questions in the interview, and if so, can they reject you on the basis that you refuse to answer a question?
If you think that an employer can't do due diligence on a hire, what can they do?
An employee who is frequently ill or absent due to injuries sustained in his private activities is a liability. However, I would be uncomfortable allowing a company to access his medical records searching for causation. I'm much more willing to allow the company to make judgments based on correlations which tend to be fuzzier and allow for some flexibility in interpretation.
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.
Once again, corporations are not people, but they want human rights. Their bottom line is their self interest, and people are their biggest liability unless they are proactive. Screw the employees and the customer; shareholder dividend is the goal, whenever possible, and permissible by law. Its seems peculiar that this company is shrewd enough to perform the illegal research, and yet, somehow incapable of following procedure, or limiting their legal exposure. Hmmm... I wonder if perhaps some of the employees that successfully passed that background check are really quite enjoying themselves now..... or maybe I'm just a wee bit cynical and mistrustful of corporate power in the hands of people.
You see, this is one of the good reasons there is the Swiss bank secrecy system. It is no-ones business how much money you have or owe! (but there needs to be a system that makes sure you pay your taxes). It is really a pity that US citizens are not allowed to use it anymore...
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"
Who is most likely to steal from you: The worker who owes 20k dollars in credit card debt and is barely keeping his head above water, or the worker who has a million dollar home and a penchant for finding profit everywhere?
I've found that a lot of people who are in poor financial condition are so because they're weirdly principled about it. They don't feel like they could go for higher salaries, because that would be wrong. They don't feel right about charging for the things that they do. They have specific hangups about money in weird ways, one of which frequently is "money is bad, and getting money is bad. I should just put my nose to the grindstone and everything will be OK."
Whereas a lot of the people I know who do have a lot of money, do so because they're unscrupulous bastards. They know how to cut corners, squeeze full advantage out of situations, and pull the wallet right out of your pants while smiling and making you feel like one of the family. I like the ones that I know, but I also know better than to sign anything around them.
I think it's fair to say that in this case, a Credit Score is not a good indicator of which type of employee will take advantage of "edge opportunities" in your organization. And in that light, it merely discriminates against the kind of suckers, err, "hardworking employees" that you probably do want in your company.
The ______ Agenda
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.
No, the companies were charged with accessing the credit reports illegally: "... Quality Terminal Services and Rail Terminal Services -- were charged with violating provisions oaf the Fair Credit Reporting Act (FCRA) which requires employers to get permission to look at individual credit reports." [Emphasis mine.]
Companies have to inform prospects of their rights and get their permission before they access credit records. They failed on both counts.
Just about everybody here has been concentrating on how dishonest employees might be if they have a bad credit report, but where is the discussion about whether you would want to work for a company that, without question, broke the law in order to intrusively delve into your personal and legally protected information?
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?
After my divorce, I discovered that the wife inherits any bad credit from the marriage, but does not inherit a good credit rating. I kept my married name since I had also had a small business as well as an online presence in that name. I had a valid driver's license, and took the joint Sears store card with me, since I had a laptop under warranty from Sears, as well as a car which was registered in both our names. We had purchased several cars, a house, and had numerous store and bank credit cards for more than 20 years with never so much as a late payment; I had no credit rating at all after the divorce. I could not open a bank account even though I had a steady job at a local university, I could not get a phone. The university was very unhappy about cutting a check for my pay, they normally used direct deposit. I had to deposit my check in a trusted friend's account, or else use a store front check cashing service for a horrendous fee. I also paid my friend's phone bill by check for six months, then was able to transfer the friend's phone into my name while the friend got a new one. The friend and I were able to get a "bad-credit" secured credit card from the friend's bank in both our names, eventually transferred into my name alone and upgraded to a more normal low-limit unsecured card. I made a point of using it at least once a month, and only making the minimum payments. It took nearly a year before I finally showed up on the "credit rating" radar.
My lesson from this is for wives to get a credit card in their own name, a bank account in their own name, buy a car in their own name. Don't presume that just because you as a couple pay your debts regularly and have a sterling credit rating that this will be applied to you as an individual after a divorce, although the husband certainly keeps his rating. But, as I mentioned, any bad credit from the marriage will be applied to you.
I'm a victim of Identity theft. Some thieves got my name, address, date of birth and SSN, filled out an online form and got a credit card in my name. (Despite the mother's maiden name being wrong. Thank you very much Capital One!) The only reason I found out about it was that the thieves tripped up. They paid to have the card rush-mailed to them and *then* they changed the address from my address to theirs (or at least a drop box of theirs). The card was mailed out before the address change went through and landed in my hands.
I never did catch the thieves (slow working police who weren't prepared for an ID theft case and an uncooperative Capital One), but I learned how to prevent ID Theft: Freeze your credit. Then the thieves can't open any new lines of credit in your name. The only downside is that you can't open up any new lines yourself without first "thawing" the credit file temporarily. (Did that when I bought my new car.)
As a side benefit, people can't look at your credit file either. So jobs can't run background checks without your prior approval and banks can't pre-approve you for credit card after credit card that you don't want or need.
Here's some more information on credit freezing: http://www.consumersunion.org/campaigns/learn_more/003484indiv.html
My sci-fi novel, Ghost Thief, is now available from Amazon.com.
About a year ago I was told at an interview that my credit would me checked. This was for a sales position at The Source by Circuit City in Canada (Now just The Source). I was denied the job even though I nailed the interview, the manager loved me, my knowledge was well beyond that of the current staff, and I was good friends with the assistant manager. Their entire rejection was based on my credit rating which came from a failed business 5 years earlier. The manager almost gave me a uniform to take home after the interview. It was a huge kick to the head when I found out I did not get the job as I really wanted the job and I thought I was going to get the job. Also, to make things worse. I would have not known the reason for my rejection if I did not know the assistant manager. I would have just not gotten a call back.
..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.
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?
...the overwhelming case of poor individuals with bad credit scores is due to poor financial decisions.
This article "Medical bills prompt more than 60 percent of U.S. bankruptcies" says otherwise.
http://www.cnn.com/2009/HEALTH/06/05/bankruptcy.medical.bills/
How does one prove that one was denied a job because of a credit report? This question is not rhetorical.
A friend of mine, who has fallen on hard times, suffering the double whammy of unemployment coupled with massive debt, has been unable to find a job for almost three years. He often gets close -- getting past the phone screen, first and second interview, tour of the facilities, and then, at the point where one would expect either an offer or "we have decided to look elsewhere", he gets -- nothing. The prospective employer simply stops responding, as if he dropped off the face of the earth. We are pretty sure something is going on, and it's almost certainly the results of a credit check, (we know his credit is ghastly) but as the company will no longer communicate, he does not know how to proceed.
I'm a little conflicted. I'm fairly libertarian in my views, and believe a company has a right to hire whom they please, but in this case it leaves someone who has had a few setbacks absolutely nowhere to go. Except, perhaps, a life of government subsistence, or I dunno, a life of crime. He wants to work and pay back his debt, but (if this is true) his debt is what is preventing him from finding work -- a classic catch-22. Where does one go from here?
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
While this is an old story it's also still a problem.
About 6 months ago I read a similar story about business's using the credit reports as a guide to see if a prospective employee would steal or not. The idea being that the better your scores the less likely you are to embezzle, or steal from your employer.
I didn't think about it at the time and forgot about it.
Then my neighbor was turned down for a job based on her credit.
She lost her job a while back (over a year ago), and instead of getting a new job right away, took the severance package and enjoyed some time off from working. By the time she was ready to work again, jobs in her field were hard to come by. After being off for so long and no longer having the severance package to help pay bills, she started falling behind with her bills. Her mortgage company, seeing all the Fed money, refused to refinance the home since she doesn't have a job and started the foreclosure process. She finally found a possible job, and was told that pending a "background check" the job was hers.
By getting this job everything would be golden for her. She could pay her bills and then refinance the house. The problem was that she didn't get the job. The reason was due to the foreclosure on her house. That showed up on her credit report. So here's the rub. Can't stop foreclosure without a job, can't get a job due to the foreclosure.
Granted, it's her own fault for not getting another job so soon after being unemployed, but I've seen dozens of folks do the same thing. You get a large payout and take a vacation.
I wonder how many other people are caught up in the same sort of issue?
You want to work, but can't due to the credit report, but if you had the job, you could resolve the bad credit report.
- Goran
Carpe Scrotum - The only way to deal with your competition.
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