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Tuesday, November 10, 2009

No Shirt. No Credit. No Employment.

A few years ago, I suspect that I lost the chance at my dream job because I refused to grant permission to check my credit history. My refusal actually had nothing to do with my credit history. In fact, I have no idea what my current credit score is or how I am rated, nor did I then. (Yes, I know that it is foolish and irresponsible not to keep track of this stuff. But that’s a future blog.) I refused on the grounds of privacy issues and the fact that credit reports are notoriously inaccurate. Today they couldn’t even ask - In July 2009, Hawaii became the second state, behind Washington, to limit the use of credit histories in pre-employment screening.

Last week I wrote about some of the insidious devices that human resource people are using these days to make the determination of whether to hire you. Some of these tools are just the natural evolution of technology, such as LinkedIn and Google. They can be both helpful and, in some cases, misleading to the point of pure untruth. But of all these contemporary screening techniques, none is more invasive or abused as the practice of using credit checks as a litmus test for hiring.

SHRM (Society for Human Resource Management) states that 43 percent of companies conducting any type of pre-employment screening use credit checks for some or all employees. And those numbers are from their last study which was done in 2006. Credit score screening has skyrocketed since then, so we can only imagine how rampant it is today.

In the other 48 states, employers can (with an applicant’s permission), pull a credit history and decline to hire a candidate based on what they find – even if the information has absolutely no relation to the job responsibilities, such as the handling of money, confidential financial information or having access to the personal property of others.

Employers claim that your credit history is a gauge your level of responsibility. Whether that is a valid assumption or not, some employers believe if you are not reliable in paying your bills, then you will not be a reliable employee. That philosophy might possibly have held some water in 2006, before the economy tanked, but in today’s job market it is just a cycle of discrimination against the jobless, whose lack of employment contributes to their financial woes. The worse their debts, the harder it is to get a job to pay them off.

As for me, my refusal to allow the potential employer access to my credit records was twofold:

1. There are long-standing concerns about the accuracy of information contained in consumer credit reports. One study by the U.S. Public Interest Research Groups (U.S. PIRG) examining credit reports found that “70 percent of credit reports investigated contained incorrect information; 29 percent contained errors significant enough to have serious adverse consequences on the consumer’s credit”

2. It’s the principle of the thing. If I apply for a job that involves national security, FDIC clearance, or significant financial responsibility (such as a bank manager) I expect that my credit history will be relevant and required. Otherwise, unless I’m trying to buy your house, it’s none of your business. It’s personal. It’s private. This is America. Is nothing sacred anymore?

Excuse me while I take a moment to get myself under control….. OK, I’m back. My husband claims that I am an Olympic contender in “upstream swimming.” Never one to just go with the flow, he calls me his personal Don Quixote,* tilting at windmills and thwarting injustice wherever it rears its ugly head. He has a point. But I am not alone in my belief that accessing credit history to make employment decisions is a bad idea. Go to the American Civil Liberties Union website and see what they have to say on this subject.

In addition to the laws that Hawaii and Washington have already enacted, the states of California, Ohio, New York, Missouri, Texas, Michigan, Illinois and Connecticut all have similar restrictions in the works. “In my opinion, it’s a clear case of discrimination,” says Representative Jon Switalski, the Democrat who proposed legislation in Michigan. “If you miss a few payments or you have medical debt, your skills as a pipefitter or an electrician don’t diminish.”

Many in Washington D.C. also agree. On July 31, 2009, members of the U.S. House of Representatives introduced the “Equal Employment for All Act,” a national bill that would amend the Fair Credit Reporting Act to prohibit the use of consumer credit checks in relation to current and prospective employees for the purposes of making employment decisions under all but a few circumstances.

Employers would also be prohibited from asking applicants to voluntarily submit to credit checks (as they are currently able to do).

The bill (technically entitled HR 3149) is endorsed by over 25 organizations, including the NAACP, NAACP Legal Defense and Educational Fund, National Consumer Law Center, Leadership Conference on Civil Rights, National Fair Housing Alliance, Consumer Action, those pinko commies over at the National Association of Consumer Advocates, Unite Here, National Employment Law Project, U.S. Public Interest Research Group, Legal Action Center, National H.I.R.E. Network, Community Legal Services of Philadelphia, Center for Economic Justice, Asian American Justice Center, Communication Workers of America, AFL-CIO, Lawyers’ Committee for Civil Rights Under Law, International Union (no good can come from unions), United Automobile, Aerospace & Agricultural Implement Workers of America (more unions!), National Employment Lawyers Association (lawyers!!), and worst of all - women -- National Organization for Women, National Partnership for Women and Families, National Women’s Law Center and Women Employed.

I guess a lot of people would have agreed with me when I refused to sign on the dotted line. If I had a do-over, I’d still refuse although the money sure was tempting. Still is. But we have to draw the line somewhere and there’s always a price to be paid for sticking to your principles.

In doing research for this blog post, I discovered other dark things living under the rocks of the credit card industry. Things I didn’t want to know, such as the fact that every time a potential employer or third-person party pulls your credit report, they are making an “inquiry” into your credit. These inquiries or credit checks are recorded in a list on your report. Having too many credit inquiries tends to lower your credit score, so don’t go applying for a credit card unless you’re sure you don’t need it.

Also, I learned that insurance companies use your credit score to set your insurance premiums so that if you’re poor (or unemployed and credit-challenged) you pay more for your insurance. (Yes, there’s legislation pending all over the country to stop that, too.)

There I go, getting all upset again. I gotta lie down. No, what I really have to do is find a new job. But maybe I should check my credit history first, since employers seem to think that my ability to make my car payment on time is the key to my reliability as a nonprofit manager or my good character.

I wonder what Bernie Madoff's credit score was?

*The main character in “Man of La Mancha”


  1. American Family Insurance is one that scores your ability to insure a home or a car on your credit score. In fact, recently jacking my rates 27%, based on hardships that effected my score in recent years.

    And you are exactly right. I wrote them a professional, yet scathing letter, denoting their practice of piling on unjustifiably. I have sent the letter to your email.

    It is a difficult time, and everybody is trying to tap someone else however they can. It is shameful.


  2. Do you understand who is fighting these credit laws? It's the credit card reporting firms. They charge big bucks for every credit check and when states eliminate credit checks for jobs, they eliminate a big source of revenue for reporting firms like TransUnion and Experion. The lobbies for these firms are huge because they have so much to lose. If even a fraction of the time and money they spend on lobbying were spent on fixing the errors in their credit reports, maybe we all would trust them more. I know that a credit problem with someone with the same last name as me cost me my chance to buy a foreclosure house. It took months and many, many phone calls and threats before it was taken off my report. By then, it was too late. I can't help but wonder if that's why my wife hasn't been able to get a job since her layoff. It makes me so mad!

  3. Mr. Max (evidentially from California) has had a particularly bad, but not unusual, experience. He is absolutely correct about the way the reporting firms make their money though credit checks. In addition to TransUnion and Experian, the other major credit reporting company is Equifax. Fair Isaac is one of the major developers of credit scores used by these consumer reporting agencies.

    The information in your credit report is sold by credit agencies to organizations with a “permissible purpose”, as defined by the Fair Credit Reporting Act. Until now, “permissible purpose” was widely translated to mean, “just about anybody.” HR3149 is almost certain to pass during this congressional session (probably after the Christmas holiday break). This will limit the “permissible purpose” to exclude potential employers and employment agencies unless issues such as national security, etc are involved.

    All challenges to an incorrect credit report should be fixed within 30 days. That is the industry policy. Of course, it can actually take much longer. Mr. Max might have taken his complaint to the Federal Financial Institutions Examination Council (FFEIC), which is overseen by the Federal Trade Commission.

    There has been much discussion over the accuracy of the data in consumer reports. Recently The Consumer Data Industry Association testified before Congress that the credit reports have a 98% accuracy. Of course, it is important to note that the Consumer Data Industry Association is a US trade association of credit reporting agencies. In other words, CDIA is the official mouthpiece of TransUnion, Experian and Equifax. I would tend to believe the U.S. PIRG figures, since they are an independent organization and not controlled by the Big Three.

    HR3149 is long overdue and will put an end to most of this shameful practice, although large corporations will always find a way to skirt the law for their own purposes.

  4. I just recently got turned on to your blog through a LinkedIn discussion group. I've been reading through your archives and I'm impressed. You manage to tackle some very big and diverse topics with humor and insight.

    This particular post may be my favorite. I have read a number of articles lately on the topic of misuse of credit reports. None has laid the problem out as clearly or with more interesting statistics that you have here.

    Well done!

  5. Interesting article.
    I'm finding that retailers are informing candidates on their applications that their credit scores will be checked. They are asking for SSNs to verify this.

    Funny how most ppl who usually work for retailers especially in the summer and during the winter holidays are young folks. Typically those without credit or those with credit due to student loans. Is your car loan held against you what about your mortgage? This is a subtle form of age discrim.

    Of course in this economy many older people have credit issues due to not being able to land a job in their profession. When an effort is made to simply pull income and be productive they are cut off at the knees through this practice.
    Businesses are taking advantage of this economy by asking illegal and immoral questions of candidates. Not the standard how old are you are you married blaring questions but things like "Who paid for your education?" etc.

    BTW I live in the DC area and if DC outlaws this practice the neighboring states of MD and VA where most DC workers live, still as far as the article states have free reign to continue this practice.

  6. As an American over the age of 50 I have encounter numerous identity frauds. And have learn that there are many legal ways for an employer to check your background. Maybe it is best to invest in identity protection such as lifelock, identityguard or trustedID. These programs notify you when someone accesses your credit file.

  7. I hadn't even thought, until I read this blog post, about how all the credit enquiries from possible employers might then affect your credit rating adversely therefore making it more difficult to find employment...

    I lost a job few months ago due to a credit check. I was fairly certain I had it, and it was a temp job, but I didn't get it due to a credit check. I discussed that when it happened, maybe on here, I'm not certain.

    I have a credit monitoring service on my checking account, and a few months ago I got my credit scores from all three bureaus. There was an 84 point difference between the lowest and the highest! This is another example of why we should monitor our credit reports and get our free yearly reports, to make sure they are accurate. But it was odd because there were no major differences between the three bureaus as to the info they contained other than one of them had a couple things missing.

    Just a few week ago I again got my credit scores, still a significant difference between the scores, but every one of them had gone up. With no job, and no new credit they went up. Granted no new credit means I can't get behind on anything, but color me confused...

    And I've been affected by the insurance credit checks as well. With my last vehicle I was purchasing insurance online thinking I had a pretty decent rate, then just at the checkout the rate went up over $150 for six month premium because that was the point they did the credit check. The rationale is supposedly that those with less than perfect credit file more claims; when in fact there are studies that show the reverse to be true.

    Makes no sense when you consider these lines:

    "but in today’s job market it is just a cycle of discrimination against the jobless, whose lack of employment contributes to their financial woes. The worse their debts, the harder it is to get a job to pay them off."

    It's like a Catch 22 vicious cycle designed to make things even worse and more frustrating...

    Gail Turley
    Consumer Services Specialist
    Phoenix, Arizona