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Wanted: People with Good Credit for Low-Paying Jobs

posted by Katie Porter

Despite the increased proportion of Americans who are behind on their mortgages or have lost their houses to foreclosure, the practice of doing credit checks on prospective employees continues to climb sharply in popularity. The Society of Human Resources Management’s recent survey found that 60 percent of employers run credit checks on at least some job applicants; back in that “healthy” economy of 2006, the comparable figure was 42 percent. The growth in credit checks by employers is some evidence to counter arguments that the stigma of financial distress, bankruptcy, or foreclosure is falling as more and more Americans struggle to meet their debt obligations. Employers seem to be taking the opposite tact, with the weak labor market permitting them to be increasingly selective about whom to hire. Credit checks are a fast and cheap way to screen out candidates. And one in 8 employers checks the credit of every applicant for every job--meaning that people like janitors and retail workers can suffer employment discrimination on the basis of their credit.

Legislatures and Congress have expressed concern about the use of credit checks in the employment context. In July, Rep. Steve Cohen (D-TN) introduced the Equal Employment for All Act. And a recent AP article reported that lawmakers in at least 16 states have proposed outlawing most credit checks for employment. Most of those bills continue to languish (despite in the case of Rep. Cohen's bill, 53 co-sponsors and support from organizations such as the National Organization for Women, the AFL-CIO, and the Lawyer's Committee for Civil Rights under the Law.) In California, which is the country’s largest labor market, not to mention one of its most hard-hit foreclosure pockets, Gov. Schwarzenegger vetoed a bill to regulate employment credit checks, calling it a "job killer." This is curious logic; I seriously doubt that this issue is of such importance to most employers or industries that they would relocate or spurn California on that basis. Moreover, the California Chamber of Commerce made the silly argument that this was a "costly workplace mandate." Umm . . . the bill would stop employers from doing something, saving them the money they now spend on the credit reporting agencies. How can that be a costly mandate?

On the ground everyday, the real job-killing happens at the individual level, when a person trying to climb out of financial trouble is told that they are not hired because of their poor credit in the past. We've blogged about this in the past at Credit Slips, with Debb Thorne pointing out the weakness of any empirical evidence showing that bankruptcies are evidence of "bad decisionmaking" rather than job, medical, or family problems. In this economy, foreclosures may be the result of predatory lending, an inability to get a loan modification, or a loan that is unaffordable now that falling housing prices prevent continual refinancing. Of course, bad decisionmaking by consumers is a part of the picture. But why do we think that an inability to have good credit, especially in this economy, is evidence that an employer will be tardy to work, will steal at work, or be a less diligent employee? The problem is more acute when employers use credit scores, rather than credit reports, which at least reveal more information about the problems that a potential employee has experienced. Credit scores are algorithms designed to predict the likelihood of repaying. I'm all about using credit scores for creditworthiness (indeed, there was altogether too little of this by lenders in the last decade) but credit scores are not designed to predict employment potential. We've seen the development of bankruptcy risk scores, a refined version of the credit score designed to predict likelihood of bankruptcy filing. If employers want to use credit in their decisions, they should come forward with reliable empirical evidence that shows a relationship between low credit score and undesirable employment behavior. If they don't have that data, then Congress should move forward and pass the Equal Employment for All Act. Rather than casting around aimlessly for job creation ideas, how about taking a simple step to make sure that those at the bottom of our economy have a chance to improve their lives through old-fashioned hard work.

Comments

Katie,
For employers, the need to understand a potential candidate's financial background is important. One of the things you want to avoid is someone who has been bad at money management and decides to help themselves to company assets - small or large. It is a trust issue. Employers are looking for: can I work with you and can I trust you? It would be better to have special coding placed in the person's credit file for any circumstances beyond their control. By doing this, the information would not be included in the credit search.

Kenn, the other side of that is the folks who filed bankruptcy petitions when they got in financial trouble are the ones who DIDN'T see stealing from their employers as the solution to their problems. They also are not the people who transfer all their assets, arrange to get paid in cash, and otherwise hide from the sheriff until their creditors give up.

Also, we know that the proportion of bankruptcies that stem from medical bills, or from the failure of a small business, is vastly understated because people use credit cards to pay medical bills or fund business expenses, but all the credit report shows is money owed to American Express, Citi, etc.

Last but not least: What exactly is "bad at money management"? Does it include paying full price at Whole Foods instead of shopping at Walmart with a fistful of coupons? What about someone who has no credit card balances but also isn't saving anything for retirement? Just how far does this go? Actually, has gone in the past. Google "Ford Sociological Department" for an example.

In survey after survey, including a recent MSNBC survey, more than 90 percent of Americans say that workplace discrimination based upon someone’s personal credit report is wrong and should be illegal. It’s already illegal in 3 states, yet Congress is being bribed by corporate campaign contributors and strong armed by lobbyists to kill the legislation that would make the practice illegal nationwide. That is NOT “democracy by the people and for the people.” How can Congress be allowed to thwart the overwhelming will of the people?

Most Americans don’t even know HR3149: The Equal Employment for All Act even exists. What’s more, they don’t know about the corruption and backroom deal making taking place to keep the legislation stalled in the House of Representatives Financial Services Committee.

Follow the money and expose the truth:

House Committee on Financial Services (only)
http://hr3149.blogspot.com/2010/03/democracy-and-money-why-hr3149-is.html

Equifax:
http://www.opensecrets.org/pacs/pacgot.php?cmte=C00143867&cycle=2010

Trans Union:
http://www.opensecrets.org/pacs/pacgot.php?cmte=C00313700&cycle=2010

Experian:
http://www.opensecrets.org/pacs/pacgot.php?cmte=C00379768&cycle=2010

Please support our democracy, the overwhelming will of the people and the rights of highly qualified American workers to compete on a level playing field during this horrible economic disaster. Join our FB PAG at: http://groups.to/h.r.3149 or shoot us an e-mail at hr3149@gmail.com with”sign me up” in the subject line.

Total Catch 22! An employer can miss-read a credit report just like a potential lender can. I agree with FJP. Is it mismanagement if you choose to pay a mortgage with your unemployment check rather than Credit Cards? COBRA? Medical Bills? Will employers even look at that? Will they see a 612 FICO score and not even look at the app? A potential Employer will not even know how a credit score is even calculated! They would be putting their faith in a system that has some serious flaws.

How will an Employer avoid violating a Chapter 7 or 13 debtors right not to be discriminated on if they see "BANKRUPTCY" and not even look at their qualifications? OR WORSE FIRE THEM!?? Will Bankruptcy be a +? It should be! It means they are less likely to have outside pressure to steal. That after all it's the whole point isn't it? Stealing? It can't be "Looking for responsibility"! What does that mean in this economy?

This discriminatory act is so wrong on all levels. Credit reports were never meant for anything under than for borrowing money, & 15 years ago this practice was unheard of.

The Credit Bureaus have dished out their propaganda too long, allowing for the brainwashing of corporations to believe they must waste their money on a useless piece of paper, all so the credit bureaus could make billions while making companies believe they must waste their monies.

There's not any research or a single shred of evidence that credit reports depict a person's character or moral ethics. This was even admitted by a Trans Union Official back on January 12, 2010 at the Oregon Senate Hearings on passage of the Senate Bill 1045. Catch it on YouTube here: http://www.youtube.com/watch?v=RypwgmjZXow

As an indicator of "character, theft potential, & job performance" let's take a look at just a sampling of individuals during the past decade or so that have actually been convicted of multi-million/billion dollar "thefts" within their corporations. Logically we can safely assume that none of the following individuals had ever made even one late payment to any creditor, & we can also safely assume that all of them had a 100% perfect credit score when they began "stealing" billions upon billons of dollars from their stock holders & corporations. This is just the short list of a few of the most high profile corporate "crooks" of the past decade or so:

Cendant Corporation Chairman of the Board, Walter Forbes
WorldCom CEO Bernard Ebbers
Tyco CEO Dennis Kozlowski
Enron CEO Kenneth Lay
Founder Madoff Investment Securities LLC Bernard Madoff

In addition to the list above of actual convicted corporate "crooks" there exists an extremely long list of those with perfect credit ratings that turned out to at the very least, NOT to be good employees of the company (the same charge being levied against American workers with bad credit reports). These individuals however, while being very poor performers for their company, were rewarded with millions upon millions of dollars in salary while employed, & huge golden parachutes when they left the company that they plundered . . . many of those corporations (including the first 3 on the following list) requiring a bailout by taxpayers just to stay afloat.

Lehman Brothers CEO, Richard Fuld
Bank of America CEO, Ken Lewis
General Motors CEO, Rick Wagoner

Clearly, we can see from the above review that those at the top of the food chain with perfect credit reports have the access, means, & credibility to "steal" millions, if not billions, of dollars from their corporations, while those American workers at the bottom of the food chain with the access to possibly steal a pencil or paper clip can't even get hired because of hiring discrimination based upon their credit reports. These workers instead are deemed "guilty until proven innocent" of having poor character, being poor performers on the job, & being thieves (even though their criminal background check says "not true"). The American worker gets no golden parachute, no taxpayer bailouts, & is getting absolutely no attention from our representatives in Congress.

This is immoral and a violation of the Bill of Rights as guaranteed by our Constitution. When you deny a well qualified human being the right to work in America-- you violate the core principals of justice set down by our founding fathers and prevent millions & millions of Americans from affording food & shelter, the basic requirements to sustain life. Plus, credit reports contain up to 80% egregious and erroneous inaccuracies, which can take years to fix, unlike the 30-60 days the credit bureaus would have you believe. Meanwhile, "the people" are being turned down for jobs because of this.

There are way too many things that can affect a credit report, like divorce, Identity Theft, death, high medical costs, etc. Speaking of Identity Theft, think of all the little children whose had their identities stolen by their own parents. Many of these children will never have a chance. Their parents used their Social Security numbers & took out loans & credit cards in their names. So now they'll never be able to get a job. Mismanagement shouldn't even enter this conversation. Who gets taught these things in school? None of us. It doesn't mean we are likely to be bad people. Bad things happen to good people everyday. All these people who keep wanting to throw that term "mismanagement" around truly needs to take a walk in someone else's shoes. And to think of the millions of people whom have lost their entire retirement & savings due to this economy & job loss.

Although they say you can explain all this to the potential employer, most do not take it into account. By law, employers are supposed to give it to you in writing, but 99.9% do not. Instead they give you a plausible excuse like, "We found someone more qualified," and they can get away with this because it's done in a room somewhere with a couple people talking & no one to over hear it. Even lawsuits are on the rise, which the EEOC is looking into, and trying to stop this discriminatory practice of using people's credit reports against them. Meanwhile, as this abhorrent practice is allowed to continue, more & more American people are losing their homes to foreclosure, starving by the millions & yes, even committing suicide because of the catch 22 of No Job=Bad Credit & Bad Credit=No Job!

H.R. 3149 Equal Employment For All Act need passed NOW. Write & call your Senators, Governors, & Representatives. Call them, & Barney Frank's office. Tell them you want HR 3149 put on the docket NOW, to be heard & voted on. Barney Frank's Financial Services Committee Office number is 202-225-5931. And help spread the word. "We The People" must all stand united as One Voice to stop this discriminatory practice. This is your Personal & PRIVATE information that should never be up for sale, not to mention the errors they all have. If we do not, think about what might be next down the pike. With Medical Records going digital, hmmmm, will that be next?

And here's something else to definitely consider...Our US Chamber Of Commerce.

Here's some information about them after doing some extensive research.

U.S. Chamber offers four membership levels: Signature ($500), Advantage ($2500), Elite ($5000), and Committee of 100 (Price to be "discussed"). I hope the average business in America has no money to waste on their membership fees. Why are businesses suffering? Because people have no jobs, & no money to spend in their stores. They are actually hurting their membership numbers with this credit check policy. They are funneling money in to defeat HR3149. What a bunch of moronic idiots. I am boycotting all Chamber of Commerce companies! When you see that Chamber sticker in the window or on their website let that company know you don't do business with Chamber of Commerce businesses because of their low pay, anti-union stance that rewards big corporations, big banks, & credit reporting agencies. And that you do not endorse the Lobbyist stance that the Chamber has taken. Go to the US Chamber Website, Select an Issue-
Check out these Chamber of Commerce "issues" that they are spending over 200 million on each year. Do you see Bankruptcy there? They were opposed to people being able to file BK. They are also Anti- Labor Union, Low pay advocates who believe employees don't need benefits. This organization needs to be put down. I think most of us will agree, we had NO IDEA how insidious the Chamber has become in depriving the American worker a decent wage with benefits. If we win HR3149, I will keep on outing this organization for what it is.

And call your local Chamber TODAY, & tell them we will fight them tooth & nail. We will NEVER become Chamber members if they continue on like this, & we will tell everyone we know to never join the Chamber. For every business owner who belongs to the Chamber there is a family member somewhere, be it a brother, sister, or child who is affected by credit checks in the work place. Let's hope business owners see this practice offers them NO LEVEL of protection what so ever. It is a useless business expense meant to rob them and deny the American worker a job. How dare the Chamber support a useless bunch of overhead all in the name of big banks and credit reporting agencies.

U.S. Chamber of Commerce
1615 H Street, NW
Washington, DC 20062-2000
Main Number: 202-659-6000
Comment Line 202 955-1165

Call and tell CEO Tom Donahue you will boycott every Chamber of Commerce business you know unless they stop lobbying to defeat HR3149!

"...a loan that is unaffordable now that falling housing prices prevent continual refinancing."

No dice. Sorry.

That loan was unaffordable the moment it was signed.

Life isn't a "level playing field." Never has been; never will be. Actions have consequences. Stop trying to legislate them away.

As far as I understand, there are four traditional sources of bankruptcy: medical, divorce, job loss and gambling. The first two should be irrelevant to an employer, and the third is obvious from a resume. However, I would never hire somebody with a gambling jones for any job that involved any trust.

In other words, a credit report could be useful to an employer, if used as a starting point for inquiry rather than a veto point. But it is probably more often abused than properly used. I can see the case for banning it.

OK Tim S don't know how this applies to the subject we are on now.. Maybe someone can bring it up and we can have a nice long discussion on it......

But NO some peoples actions do not have immediate consequences. What about all of those Mortgage brokers who made the loans that they knew would not ever work out. They got their cut and ran! How are they suffering? Well maybe they are suffering now that the economy totally collapsed and are unable to make anymore loans. They still got their cut and shifted the pain to everyone else. Even people who made good decisions on Mortgages are suffering because of them....Oh lets not legislate that away. Screwing people over is the American way! We legislated away Glass Stegall and now we have some Repubes saying "lets look at that again".?? We legislated away consumer protection. Are you saying we should not have done that? If so? I agree.

I agree with everyone here who is against such a discriminatory practice, and for whatever reason, especially in the current economic conditions, and including the sum total of business and corporate fraud that we know about (let alone, the amount that still stays hidden.)

However, I would like to add some food for thought: If hiring employers are faced with ever-increasing ratios of applicants per position advertised, I'm not surprised that they are looking for any way possible to reduce the sheer number of applications tendered. If one posted job produces hundreds of qualified, and even over-qualified applicants, then it's a serious task to narrow that down to a workable number to screen, screen again, and continually, until you have a reasonably small number of applicants to actually interview.

That being said, I can understand somewhat this process for the relatively small number of really good jobs...I think it's ridiculous, on the other hand, to employ such a system for McJobs - whatever deadend slop that constitutes the safety net for workers truly willing and able to work at literally anything, rather than starve, or face the shame of handouts from the state.

What should be considered here, is that when people have faced, and survived hard times, kicking them when they are down and out by refusing employment that might actually assist them in turning their lives around, is hateful cruelty.
I'd be tempted to throw that on the growing pile of corporate malfeasance, incompetence and general borderline criminal negligence that has produced the economic debacle we now enjoy. Just another part of the same old package.

I worked hard for an employer for 15 yrs and was known as a person who was trusted. I handled money ever day. My score wasn't the best but that never, ever, caused thoughts of dishonesty...EVER! I am angered that it would be stated a low credit score equals a bad choice for an employee.
Never once did I consider helping myself to company assets...EVER! There are no supporting facts that low credit scores would cause a person to be dishonist even when faced with the opportunity to "help themselves". To base a decision for employment on credit scores is another "color" of discrimination...that is a FACT!

@Joe S. -- You have such disdain for Republicans, yet it was the Clinton Administration that got rid of Glass Steagal. That act protected us from the things that caused our pain in the first place.

Blame the other guy? Grow up. (R)onald is sleeping with (D)onald. When are you going to figure that out?

I find it interesting that so many companies are using credit checks when hiring people for even entry-level positions in which employees have little to no access to company resources. I wonder how these same employers would respond if prospective employees were allowed to see records of the company's financial history before deciding whether to accept employment?

This practice is unethical and immoral. It's nothing more than a tool to keep economically disadvantaged people in their current state. As far as the supposed correlation between credit score and theft - what was Bernie Madoff's credit score? What about the Wall Street hotshots who drove the economy into the toilet? I believe that a status-oriented individual who faces losing that status is far more likely to abuse company resources than a low-income parent who fell behind on medical bills.

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