Service of Credit History

September 22nd, 2014

Categories: Credit History, Interviews, Jobs

Credit report

Andrew J. Hawkins wrote “De Blasio, council urged to ban credit checks in hiring,” in Crainsnewyork.com. The Mayor and City Council are working “through the details of a bill that would prohibit employers from reviewing the credit histories of potential hires,” he wrote and that “liberal advocates are pushing for passage of the strongest possible version of the legislation.”

job interview 1I clicked the Dēmos link in the article—what Hawkins described as a “progressive think-tank.” Its members believe there is no relationship between a person’s credit and their potential to misuse information, steal or commit fraud. In a memo to the Mayor and City Council Speaker Dēmos quoted a credit reporting company’s spokesperson as telling the Oregon State Legislature: “We don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”

The group wants no exemptions and disagrees with state laws that permit credit checks for staff with access to valuables or cash. The memo reports that “Senator Elizabeth Warren and 18 co-sponsors have introduced legislation in the United States Senate that prohibits credit checks for all positions except those requiring national security clearance or where required by state or federal law.”

job interview 2I was bonded by several employers. One, who had been burned by the head of the accounting department who stole $hundreds of thousands, would look for signs to indicate that other employees might be spending far more than their incomes would support. He’d want to find out who gave that administrative assistant her fur coat or what’s in those shopping bags that an account exec brings back from lunch break? I have no idea what the credit rating of the accounting scoundrel was or whether checking a person’s credit rating was routine nor do I recall the information required by the company that bonded me.

Looking at a credit rating, how would a potential employer know whether a person had excessive shopping habits which might indicate instability or irrational thinking? Maybe it was a spouse or child. Perhaps they’d been adversely hit by the economy, owe more on their mortgage than their property is worth, replaced a good job with poor paying part time ones and maxed out credit cards to pay for essentials. Would this automatically mean they’d cheat or pilfer? On the other hand should an employer’s hands be tied and kept from such information?

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10 Responses to “Service of Credit History”

  1. DManzaluni Said:

    This unfortunate question of government regulation of the credit reporting industries is tied in with the more general question of public/private credit reports.

    One can easily gain access to the public report and correct mistakes on it: However no member of the public can get to see or correct the REAL report which banks, money institutions and potential employers actually use.

    if Elizabeth Warren cant or wont correct this fundamental flaw in the whole system she is just a well-spoken and exceptionally articulate phoney

  2. Jeanne Byington Said:

    DManzaluni,

    I didn’t realize that there are two reports. Joy. For a person who went bankrupt seven or more years ago, does this mean that the public record won’t show this information, [pretty sure it’s off the books after seven years], but the real report keeps this information fresh for the duration?

    And by extension, is the law being considered by NYC relating to any credit report, including the “real” one that banks and employers use, or only to the public report, in which case it doesn’t really matter?

  3. Lucrezia Said:

    Bad credit doesn’t necessarily mean ineffective employee. A credit check would be appropriate if a candidate’s position entailed any area in which he would be able to steal, accounting and retail, as examples.

    There’s altogether too much snooping in today’s society. Should this worsen, no one will be hired.

  4. Frank Paine Said:

    I am a credit professional with almost 40 years of experience. Among other things, I wrote a 50+ page paper (admittedly quite a few years ago) on the Fair Credit Reporting Act.

    A couple of comments:

    No, a poor credit report or score doesn’t necessarily mean that somebody is an over-spender, or automatically mean that someone is guilty of fraud. However, weak financial condition does mean that the likelihood of temptation is greater than for someone with strong credit standing. Consequently, it is not hard to see how the credit report is legitimately of interest to prospective employers.

    I do have some problems with how the credit report process works, and believe that it could be improved. I have long felt that one of the most likely offenders in the use of credit information is government, something that the Fair Credit Reporting Act didn’t address. But to my mind, preventing prospective employers from checking on prospective employees’ credit standing defies logic. Those demanding statistical reports indicating correlation are guilty of not really understanding statistical theory. Correlation is such a weak relationship that it is next to meaningless anyway. This is because the the variables with a positive correlation may be, and frequently are, both related to something else. Logic is much more useful.

  5. Jeanne Byington Said:

    That makes sense, Lucrezia, but I think that the law won’t let most employers make such checks at all as they are considered discriminatory, including retailers, jewelers and maybe even those trying for cashier positions. It will be interesting to see what the City Council signs. It appears that businesses are not their concern although where will this city be without its businesses?

  6. Jeanne Byington Said:

    Frank,

    What you wrote, “Consequently, it is not hard to see how the credit report is legitimately of interest to prospective employers,” makes sense. Should the prospect in every other way be suited to a job, an employer might ask about the credit situation, unless this is against the law, as it is to ask if a candidate plans to have a fifth child. It could very well be that the person was fighting to clear up a mess as a result of identity theft and had paid every bill on time for 30 years.

    I’m always comfortable with logic.

  7. Marty M. Said:

    The first duty of any elected official is to serve the public, not to get himself or herself reelected. To curry favor with the baser elements of the population by suggesting the government do away with credit checks, as flawed as they may be, in its hiring process is downright nutty.

    Obviously, some jobs require a higher degree of qualification than others, but the more you know about the people who work for you, the more likely you are to place them in the right jobs, and then everybody benefits, except the corrupt whose primary interest is in how much they can cream off having gained public office.

    My father always used to say that this country was a mix of the first and third worlds. Not checking employees’ qualifications, maybe because they aren’t adequate, is a little too third world for me.

  8. Jeanne Byington Said:

    Marty,

    I never thought to figure out what countries made up the second world. If there is one, I’d like to think that we have some people from there as well.

    What I love about NYC is its diversity of age and background. I’ve never felt comfortable in groups made up of what I consider arbitrary sameness such as age or religion for example…I know I’m strange in that regard. Because I share age or religion with you doesn’t mean that I’d get along with you. One reason I love mentoring students is that I get to hear what’s on their minds and apart from fear of hurricanes, the idea of a Florida community made up of old timers has never appealed. Unless industry or interest related, I’m not too keen about clubs either.

    Back to qualifications for a job and credit reports. I think that all the so-called free credit temptations –“use the furniture for a year and you don’t owe us a cent until next year”–and the idea that you should buy something now because you want it, not because you can afford it that marketers promote and the public believes, is at fault in equal doses as is the economy in shaking credit reports of the previously worthy. We read about the hedge fund managers and recipients of millions as a result of successful IPO launches but very little about the millions who are squeezed to the quick by this economy. In the latter case, should knowledge of excessive credit card dependence and slow payment bar a person from salvation from the situation through a good job? I don’t have a label for these people or the perhaps fourth world they come from. I think that the economy has dealt evenly with all middle class worlds and demographics. The very wealthy–fifth world?–are the only ones who are safe.

  9. Anonymous Said:

    I do not think that personal credit history should be made available to possible employers nor do I think such history should be a determining factor in hiring. What special wisdom or powers does any unknown potential employer or interviewer hold that such an individual should have access to other people’s personal information? It seems that there is an epidemic erosion of privacy via either legal or illegal (hacking etc.) means running rampant in the U.S. at least at the moment.

  10. Jeanne Byington Said:

    Anonymous,

    I agree that privacy is always an issue, though a candidate for a job volunteers for an interview and revealing career and other information so I don’t think a potential employer looking into credit history is quite the same as a hacker or the government or nosey marketers.

    Change the topic to health and it gives the conversation a different spin. Take a person who had cancer. Should a potential employer know this? Wouldn’t the information impact their hiring the person for fear of potentially high future health insurance premiums?

    But we’re not talking health information but credit history. It’s a complicated topic.

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