Should credit scores REALLY be used as a factor in hiring people?

[ck4829]

Poll question: Should credit scores REALLY be used as a factor in hiring people?

I am looking for another job. In almost every application I look at, I see that the companies that are hiring are always looking up credit scores.

And I thought to myself last night, "Oh my God... in this struggling economy where there is no job creation and the places that are hiring are looking up your credit scores, this could be the formula for an extremely vicious cycle."

A person makes some mistakes and they mess up their credit score, they can't find a job, then they can't repair their credit, you want to repair your credit, but tough, a good credit score is becoming a prerequisite for more and more jobs. Indeed, it can be a very vicious cycle for many well-meaning people.

I think using credit scores as a factor in hiring people should either be banned or maybe taxed (Companies would have to pay some sort of tax to check credit scores), and this can also be the first step out of a credit-based economy.

What do you think?

[hobbit709]

1. Right up there with getting insurance.

[rucky]

2. FICO is a proprietary formula.

Scores are run by a private company - Fair Isaac.

I don't think we want a private consulting firm deciding who works and who doesn't.

[Trekologer]

6. I have no dilusions that FICO will stop being used

But what I think we should start pushing for is that in addition to being able to request a copy of your credit report once a year, you also are provided with your FICO score and how it is calculated (and not some re-formulated one that is different from what a creditor would get). In addition, anyone who uses a FICO score would be required to disclose HOW they use it and specifically what each score bucket translates to (such as under 600 we do x, 601-700 we do y, etc).

[rucky]

44. How it's calculated would be nice to know.

We have general ideas, and we know we can take certain actions to improve credit scores. But if we're being graded, we need to know exactly what and how we're being graded on. If we're going to shape public policy and private lending policy around a secret formula, then that formula needs to become public, and itself subject to CRA and other standards.

[JTFrog]

3. And the more inquiries you have, the worse your score gets.

I've never quite understood why THEY aren't the ones providing a credit score so that I know I'll be getting paid. I'm the one providing the service in advance of payment.

:shrug:

[Chulanowa]

5. Ever tried this discussion with a freemarket Friedmaniac?

These are the sort of people who got their MBA's and are running these companies. The logic they use is that YOU are not providing THEM with a service, but the other way around.

You see, according to the free market sorts, the fact you are paid at all constitutes a handout. They think that is a service your employer is providing you, being a cash machine. From this painful logic coems the attitude that the employer can thus make any demands of you they want in the workplace, and if you say anything, you're an ingrate, a bum, and should be fired on the spot for offending your employer benefactor.

The demands for good credit scores are more of the same - rich people serving other rich people to enrich themselves

[surrealAmerican]

7. That is a very good point.

The employer's finances are much more relevant to prospective employees than the employees' finances are to them.

[willing dwarf]

4. In some cases yes, most NO

The only time it seems appropriate to me is if a person is in a position where they are going to be handling lots of money and where "need" might become opportunity.

But even then, shouldn't the onus be on the company to establish systems where no one is put in such a position, for their own well being as well as that of the funds in question.

[AngryAmish]

8. I always use it

One factor among many. But all employees have access to large sums of other people's money, so absolute trustworthiness is essential.

[Bluenorthwest]

9. And of course, both history and current events teach us

that those who have plenty never, ever seek to steal more.
Seriously, how does that play out for you? Have you had instances of theft? Are they among the credit poor exclusively? Have those with strong reports never stolen from you? How many of your employees have stolen from others in general? Is that common in your field?

[AngryAmish]

19. I've never had a theft

Mine is a small office without a theft so I can't make correllations/causations about the credit poor and credit worthy and theft. It is not unknown to have thefts in my field. Those who steal/embezzle generally have great debts. That is reflected in poor credit scores. Those people I know in my field who have suffered these losses from people with huge debts.

[Fumesucker]

28. There is no such thing as "absolute trustworthiness"..

A figment of the imagination.

[derby378]

10. My workplace doesn't check credit scores

Criminal checks, yes, but they understand that if you've got credit problems, the easiest way to get out of trouble is to make enough money that you can pay off your creditors.

[bertman]

75. Not necessarily, derby 378. We have hired two individuals who had been bankrupt due to

overuse of credit--their statements to us when interviewing them, not something we ask on our job apps. Both individuals were good workers who began getting raises and in one case a promotion. Both were making more money on the job than they ever had. Nonetheless, they could not live within their means (or the spouse/girlfriend couldn't) so they started doing creative work hour and mileage recording on their time cards. One thing lead to another and both ended up costing our company a lot of money.

Just another perspective.

[slackmaster]

11. It depends on the nature of the job

I wouldn't want to hire someone with a very low credit score for a job that involved handling cash or jewelry, or other valuables that are easily stolen.

[Bill McBlueState]

15. If employers are going to espouse this line of thinking,

they should be required to produce evidence that employees with low credit scores *actually are* more likely to steal from them. If the prospective employee is required to sacrifice his privacy to such an extent, a little evidence that it's worth doing isn't too much to ask in return.

[Xithras]

27. There are studies showing that very thing.

I owned a business up until this past February, and had whitepapers from several staffing firms on this very topic. There have been both industry and private studies of this topic (mostly driven by the banks) which have clearly shown that employees with credit problems are a larger theft risk. It makes sense if you think about it...people who need money are more likely to steal it than those who don't need it.

Still, I never included credit checks as part of my hiring process.

[Fumesucker]

29. Most people who "don't need money" aren't working for someone else..

I think you meant to say something other than what you actually said.

[Hello_Kitty]

39. Gee, what a surprise

And I'm sure the drug testing companies can show you stats to justify demanding prospective employees pee in a cup too.

[slackmaster]

31. I worked for a bank for about eight years

Poor credit history is indeed a predictor of who is most likely to embezzle money.

[tabbycat31]

72. I worked in a bank too

and the employees who were the worst behaved (including someone who repeatedly borrowed $$ out of her drawer to buy lotto tickets) were there so long (in this employee's case 14 years) that they were grandfathered in before credit scores mattered.

[slackmaster]

79. Anyone who "borrowed" money at the bank where I worked would have been terminated immediately

No second chances.

[DemocratSinceBirth]

45. I'll Bet Bernie Madoff Had A 780

~

[slackmaster]

49. Astute Readers(TM) will note that I made no statement about high credit scores predicting anything

Only "very low" ones. ;-)

A very low credit score is not necessarily an indication of a tendency to steal, but it is a red flag and calls for a deeper investigation.

[Sen. Walter Sobchak]

60. you would be surprised how many wealthy people have poor credit scores

If only for their lack of use of consumer credit on a regular basis.

[rvablue]

66. I bet Bernie Madoff had a stellar credit score up until a few months ago

Just saying.

[melm00se]

12. it depends

if you are:

1) handling cash and you are deeply underwater financially, the temptation to correct that situation might be too much for someone to ignore
2) employed in a position that analyzes/deals with credit worthiness (ie credit underwriting/collections), then yes...if you can't handle your own finances how you guide someone else?

Should your credit score be the sole factor? absolutely not. Should you have the right to offer justification to the score and have that taken into account? certainly

[tabbycat31]

13. only if it's relavent to the job

If you're working in say banking or the financial industry I can see it. If you're stocking the shelves at Walmart, no way in hell.

[tabbycat31]

14. it depends on the job

if the job requires you to handle large amounts of money, or if you have access to other people's personal info (SSN, etc).

If you're stocking shelves at Walmart, hell no.

[MiniMe]

18. Exactly

Add to that handling credit card information

[KharmaTrain]

16. Highly Discriminatory...

I agree with other posters that a criminal check is fair game, but digging into one's finances is an invasion of one's privacy...and self dignity (not that such a thing matters in corporate America). Sadly, millions of people are in credit hell...and the money they earn would go to improve their situation. While there are those who spent beyond their means, many others got into their messes just trying to make ends me...came up with more month than paycheck and got sucked into paying minimums and watching the interest ball roll them over...along with their credit scores.

Inversely, a kid coming out of college, who doesn't have either the history or the financial responsibilities will sail through such a check..despite the fact many have never had to juggle family, housing, food and other major expenses an older person does. Thus the corporates can use this gimmick to discriminate against older, married workers. And is it the credit score that bothers them? Of course not...it's the fact that older workers have a greater sense of their own worth and expect more from an employer...financially and with benefits. A kid out of school is just glad to get the paycheck and almost always will take far less, not only than an older person, than even their own skills should demand.

Using this litmus test against people who get stuck in debt hell only ensures they will stay there...digging people deeper into servitude, not less.

Any employer worth his/her salt can tell a lot about a candidate with their interview...looking over resumes, checking references and using their own common sense. This sounds like an economic trap...low credit score = wants more money = too "expensive" to hire.

[laundry_queen]

78. I completely agree.

Another form of slavery. A total trap. The whole thing is just sickening to me on so many levels.

[Bill McBlueState]

17. I'd like to see evidence that a low credit score correlates with a propensity to steal

People who support credit checks tend to say that employees who have access to a lot of money should undergo more scrutiny to determine if they're likely to steal from the employer.

Is there hard evidence that people with low credit scores are more likely to steal from their employers? Too often in the business world, important decisions are based on vague suppositions about what seems likely, instead of real evidence.

[slackmaster]

62. A low credit score MAY indicate that a person is not good at handling finances

If I am looking for a CFO, I wouldn't want to hire someone who can't handle personal finances well.

[BlooInBloo]

20. It should be banned. However, let the record reflect...

... that my credit is so bad that I can't buy a house or car.

Every job I've applied for in the last 3 years has required credit check. And I've never failed to end up with a job offer.

So I wonder precisely how important the credit report is to employers.

[a la izquierda]

21. A friend of mine who just got a job at a university

as a professor of Anthropology had to undergo a credit check. WTF?
My credit is horrendous. I've been in school for 11 years (B.A., M.A. and about to finish a PhD). If I get credit-checked, hopefully it won't affect my ability to get a job.

[IdaBriggs]

22. I picked "other" because I think there are times it is appropriate.

In cases where absolute trustworthiness is expected/required, check everything under the planet, up to and including credit scores, and then do what everyone does: make your best guess.

Do I need to know my mechanic's credit score? Hmmm. Might be nice to know, especially when being presented with a bill that I think might be inflated. Do I want to know my financial advisor's credit score? That could be *very* useful!

I know people who have declared bankruptcy multiple times; would I hire them? Reality is, probably.

Then again, I made the mistake of not checking the credit score of a family that just screwed me royally on one of my rental properties. I am not the first they've done this to, nor will I be the last. The information was out there that would have protected me; I just didn't utilize it.

Hindsight is 20/20. Sigh.

[Canuckistanian]

23. As an indicator of "responsibility" credit scores are terrible

You could have a bad credit score for any number of reason that are not your fault.

ID Theft, fraud, robbery, sudden medical bills, natural disasters, clerical errors, bankruptcies, layoffs and a probably a thousand other disasters could leave you destitute and unable to completely pay your bills.

You can't draw a conclusion about someone from their credit scores alone. I'm surprised that competent, professional HR people would depend on them.

[Sen. Walter Sobchak]

64. That is why you check the credit history and not just the score

If you have somebody with a rock solid credit history - and only problems within the last year you can say you have a responsible person fallen on hard times - if somebody has been in revolving arrears forever, well you have something else.

And "competent, professional HR people would depend on them" is a triple oxymoron (they aren't people)

[Xithras]

24. Depends on the job.

I think it's used way too broadly, but the statistics are fairly clear. People with financial problems and severe economic pressure, when put in positions where they are handling cash, are a much higher theft risk. I can understand why many employers want to know the financial backgrounds of employees who will be handling their money.

Aside from those employees, I think the practice should be banned. No employer needs to know the credit score of a secretary or waiter.

[madamesilverspurs]

25. Insurance companies

looked at my credit score when I was getting car insurance. I complained to the state insurance commissioner who explained that 'credit scores are a legitimate indicator of risk.' When I asked how that was more germane than a pristine driving record she hung up on me.

[AllieB]

26. It's highly discriminatory and classist.

What if someone's credit score is in the toilet because of medical bills or divorce? There are many reasons people have bad credit, and it doesn't have a lot to do with how responsible they are. rich people generally have better credit than poor people, so that adds another layer of discrimination to the picture.

[Xithras]

30. FWIW, there are ways for applicants to address that.

An employer has to get your permission to do a credit check. If you're applying for jobs that require credit reports and you know you have credit issues, it's a good idea to have a short pre-written letter ready to go that explains any issues they might see. An employer looking at an application with a bad score and a letter explaining that the applicant recently went through a divorce is more likely to overlook it. An employer looking at a bad score with no explanation simply has to assume that the person has more general financial issues.

[lmbradford]

32. credit scores

We had perfect credit for 14 years. Then we were layed off and were unemployed for 9 1/2 months. Needless to say our credit rating is in the tank. If we had filed bankruptcy our credit score would be in the high C range, but since we took four years and meticulously paid off everyone we owed, our credit rating is a big fat F.

Recently my husband was offered an ideal job. It would bring us back out of the struggling faze of our lives and bring us up to the comfortable stage. He had it in the bag until they did a credit check. Then they declined to hire him.

It is horrific being in this position. Our morals are keeping us down. It feels like a no win situation designed to keep the poor ---poor and keep the rich ----rich.

Any advise? We just keep getting farther and farther behind because we don't make enough to keep up. But we are grateful, because we are at least struggling by. Most everyone I know is facing layoffs and pay cuts.

Life just sucks most of the time....

[aikoaiko]

33. Absolutely, I use credit scores to screen out renters.

There will always be jobs that won't care about credit scores. People can work them until they repair their credit scores.

[Marrah_G]

34. I can understand credit check for renting.

But never for jobs.

[aikoaiko]

36. there are differences and credit scores should be regulated to make sense

but an employer is trusting the companies resources with employees the same way I trust my little condo to a renter. I think it would be foolish to use a credit score as a sole criteria or without exploring the context of those scores.

[AllieB]

37. Exactly. What does credit have to do with job experience and references?

As a manager, I never check employees' credit scores. I check their references and job experience and match the dates on their resumes with past employers. Someone's personal financial information is none of my business.

[Missy Vixen]

40. What jobs are those?

Please share with the class. My husband works in the software industry. He doesn't handle money at all. He's been credit-checked for every job he's interviewed for so far.

>There will always be jobs that won't care about credit scores. People can work them until they repair their credit scores.<

Again, let's hear it: What are these jobs? Where are they located?

[slackmaster]

51. A friend of mine works at a meat packing plant

His credit is good. He's an equipment mechanic.

He's also the only person there who is not a convicted felon. I would bet that most of the employees have pretty poor credit histories.

[aikoaiko]

55. Well for one, faculty positions don't get credit-checked.

:)

[cap]

68. so where will renters with poor quality live?

where can people live for 7 years until their credit score improves? I don't think credit score is correlated with paying the rent on time. Many people manage their rent on time but pay the rest of their bills late because having a roof over their head is a number one priority. I would look at the databases on rental payments before I would look at credit score. Or, if I looked at credit score, I would look for any reporting on judgments on rental payments and not anything else.

[aikoaiko]

70. Its true, that I use the entire credit report and not just the score.

Yes its true that some people pay rent first and other bills last, but people who pay all bills always pay their rent.

There are other complexes or condo owners who are willing to take the risk on people with poor credit.

[lumberjack_jeff]

35. Sure. It's at least as relevant a reflection of a person's ability as college transcripts. n/t

[AllieB]

38. As a hiring manager, I assure you that it isn't.

Someone's personal financial information is none of my business. However, my company does criminal background checks, and we check references, job experience, and match resume dates with past employers. That's all that's needed.

[lumberjack_jeff]

46. A person who pays her bills is more likely to be a conscientious employee.

It is reflective of a person who honors their responsibilities. It's far more useful and less intrusive than a drug test, for instance.

Certainly there might be mitigating reasons why someone has bad credit, poor grades or limited education. A good HR manager will scratch the surface to find out what those reasons are.

[AllieB]

47. Do you have any conclusive study that shows this is true, or is it an assumption?

Are you OK with private companies like Fair Isaac, and Equifax determining whether you may be qualified for a job based upon a credit history that may or may not be correct, rather than work experience and references? Credit scores were originally used to determine credit worthiness when applying for loans and credit cards. In order to increase their revenues and market share, companies like Transunion and Equifax had to find other ways to make money. If you're OK with Big Brother sniffing into your personal finances, are you also OK with all the other trappings of a fascist society like wiretapping? If they can look into your private financial affairs for other than credit-related inquiries, where does it lead?

[county worker]

48. That is so black and white it makes no sense.

Life changes can effect how you pay bills. You get laid off, a spouse you depend on for income is disabled, any number of things you don't foresee.

[wickerwoman]

71. Nobody is going to dig around when 900 people are applying for 1 position.

I've been the victim of identity fraud twice already and have been jerked around by the credit card companies both times it happened. My credit isn't awful but it sure as shit isn't an indication of how conscientious I am.

And in this market, it's not really a choice to disclose or not to disclose since my resume will immediately be thrown on the trash heap for refusing to let them take a peak into my private business.

[cap]

69. Few people hire on college transcripts...

and except for a very small minority, college transcripts are irrelevant after the first job.

In fact, there was a poll of employers who stated that their most important criteria for hiring was not qualifications or intelligence but attitude. :)

[Gormy Cuss]

41. Employers should not have access to credit scores or credit reports period.

Neither should insurance companies.

First off, credit scores are dependent on credit histories that may or may not be accurate. Yes, we're told to check them regularly and report errors but why the hell are we supposed to the the credit bureaus' jobs for them? If credit histories are so darn important it would behoove the credit bureaus to get it right all on their own.

Second, credit histories were established and credit scoring was modeled to judge someone's creditworthiness -- not their goodness as employees or their insurance risk. Extending it to employment and insurance was a mission creep that was done specifically to drum up more revenue for the credit bureaus.

And on a related note, since credit bureaus insist on using SSNs as principal individual identifiers, the credit bureau should be forced to pay a user fee to the Social Security Administration.

[Freddie Stubbs]

58. Employers do not have access to that information

Prospective employees have to give them permission to access the data.

[Gormy Cuss]

74. And prospective employees are told that it's a condition of employment

to allow access to the credit score which is modeled on credit histories, or to allow access to reports on the individual that are developed by credit bureaus.

edited for clarity.

[AllieB]

42. It's Big Brother.

Someone's financial information should only be relevant when applying for loans etc. If the position entails handling money, why not do a criminal background check?

[Pisces]

43. If a company sees recent problems I don't think they will hold it against you, however

if you credit report shows 10 yrs of bad history this says something about you as a person. Someone who is not responsible will always have bad credit, not just during a crisis.

[HughMoran]

50. This is the most ridiculous practice ever

Companies should not be allowed to do this shit - it makes me angry just to think any would.

[Matariki]

52. It was banned in Washington State - should be banned everywhere.

The Washington law has some exceptions for jobs that it would be relevant for.

[Matariki]

53. I suspect that credit reporting agencies try to sell their service

to as many industries as they can - like the insurance industry. The more their services are used, the more power they have.

How does your credit score reflect what sort of driver you are?

[AllieB]

54. Exactly. I have great credit and drive like a maniac.

:evilgrin:

Of course, I'm from Massachusetts so that explains everything.

[ColbertWatcher]

56. I've never understood this practice. If anyone does, please explain it to me. n/t

[Pisces]

59. It is a pretty basic concept. If you look at 10yr to 20 yr credit history:

How you pay your bills shows if you are a responsible person. Good payment history with a blip in it can be explained( ie. Medical, lost job, divorce etc). Consistent bad pay history shows that you are a flake who lacks responsibility. If you are an employer you would like to hire people who show responsible traits. It is expensive to train people. When you are making a crap shoot of strangers you try to find any leg up you can in the hiring process. Most companies that pull credit allow for explanations on problem history.

Credit history shows a pattern of behavior. Most people may not like what it says about them, but it doesn't lie.

[ColbertWatcher]

63. But, why is that a company's business?

What if it's the applicant's first job? What if the applicant has no credit history?

[Pisces]

67. If it is your first job, obviously the company is not going to hold no credit history against you.

Only bad credit history is used to evaluate your hire. Not all companies pull your credit. you can decline to allow them access, however, I can not imagine them hiring you if you do. I have hired a lot of people in my life and I can tell you that the most responsible employees have had good credit. My flakey employees had bad credit that I allowed to explain away. They were consistently late and quit with no notice. Credit history and patterns in your credit history directly link to your character.

Now with that said this economy is driving the best to default on payments. I do not believe that many companies will hold a person responsible for defaulted payments who lost their jobs. It wouldn't make sense.

[ColbertWatcher]

73. I too have hired a few people in my day.

But, I retired long before this arbitrary criteria became de rigueur.

Nevertheless,

"I do not believe that many companies will hold a person responsible for defaulted payments who lost their jobs."

But, they could, which is the problem.

[Sen. Walter Sobchak]

57. We look at credit reports - not the score

The credit report of somebody who has been unemployed a year and is in arrears through little or no fault of their own and somebody who has been a deadbeat for years isn't the same and you would have to be pretty stupid or lazy to reject somebody on an out of context number.

Its just one thing we look at,

[Kajsa]

61. A person needs a job to make money,

and get OUT of debt,

yet, can't get a job because of
a lousy credit rating.

It's insanity- Ban It!

:(

[ColbertWatcher]

65. Exactly, a catch-22. n/t

[SoCalDem]

76. It's a facet of the person.. It shows how diligent they are with tasks

tasks like paying bills on time (..making business deadlines?)

living above their means...( might be tempted to "borrow things" from workplace?)

has too many financial obligations to worry about ...(might be distracted at work..or constantly looking for higher paying jobs)

credit reports also offer insight into actual wages they have been paid..people often embellish or leave things off their applications.. (like a job they were fired from, or only worked a few months)

For applicants, it sucks to have this information "out there", but it's the way it is these days..

Car dealers look this stuff up, banks do it, bosses do it, insurance companies do it.. It's just something we all have to live with:(

[The Straight Story]

77. No - Unless we can do the same with banks asking for bailouts

:)