Later On

A blog written for those whose interests more or less match mine.

Catch-22: Credit scores and finding a job

with 5 comments

Interesting post:

The previous post arose from things I came across while failing to find what I was looking for. I was trying to find concrete data on the reportedly increasing use of credit "scoring" by prospective employers and its relation to the disturbing trend of very long-term unemployment.

Because the two trends seem to me to be related — like the two sides of a vise.

MSN Money’s Liz Pulliam Weston says a survey of HR managers found the use of credit-checks in hiring had increased from 25 percent in 1998 to 43 percent in 2006. Weston also describes the elegantly nasty conundrum this creates for those who lost their jobs in the global financial crisis:

Many Americans these days are discovering the Catch-22 of unemployment. And that is: You might fall behind on your bills because you’ve lost your job, and you might not be able to land a new job because you’ve fallen behind on your bills.

[Update: Three grafs snipped here from original post. See below.*]

This is cruelly Kafkaesque. It’s also bad for employers, arbitrarily reducing the size of their pool of qualified potential employees. And it’s hindering economic recovery, prolonging the revenue-loss and the expense of unemployment, hobbling economic growth and therefore, yep, reducing the overall number of new employees being hired.

The credit agencies claim that this service they’re selling of credit-checks on job applicants can reduce employee fraud and workplace violence.

Asked to provide evidence of this claim, they repeat the assertion in a much louder voice and remind us that fraud and workplace violence are undesirable.

Which is to say they have no evidence for this claim and that there is no evidence for this claim. It’s just something that Transunion, Equifax and Experian hope that their corporate clients will come to believe if they repeat it often enough.

Andrew Martin of The New York Times pursued this point back in April, producing a dark comedy of twisting evasions from representatives of the credit agencies. (See: "As a Hiring Filter, Credit Checks Draw Questions.")

So why, then, is something cruel, self-defeating and broadly destructive becoming more widespread?

A big reason, I suspect, is …

Continue reading.

Written by Leisureguy

25 July 2010 at 10:52 am

Posted in Business, Daily life

5 Responses

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  1. Hi LG;

    I thought this link might help from the worlds largest Credit score provider Experian:

    They offer pr-employment screening services to businesses and also insight and advice as to why it’s important to screen credit bureau’s

    Here’s an excerpt and I feel that you have touched on a very interesting and troubling topic:

    Legal guidelines
    The Fair Credit Reporting Act, as amended by the Consumer Credit Reporting Reform Act of 1996, allows users access to a consumer’s credit report for employment purposes. The law imposes several conditions on users who pull consumer reports for employment purposes (Experian’s Employment Insight report). Learn more about legal guidelines……



    26 July 2010 at 10:25 am

  2. Interesting. California has taken some steps to protect me. From your link:

    California Civil code prescribes additional responsibilities for subscribers who procure an Employment Insight report on a consumer with a current address in California. California law requires that in addition to the written disclosure required by the Fair Credit Reporting Act, the user also must offer the consumer a box to check to receive a copy of the report at no charge to the consumer.



    26 July 2010 at 10:36 am

  3. Ahh…That’s why Experian offers a credit report inquiry copy sent to an applicant when you sign up for this employer service with them. They are apparently aware of the employers requirement to send a copy to the applicant.

    Question is: Does the employer make it a prerequisite for hiring ? could an employee refuse to offer his SS # for example up till the time of a serious offer being made ?



    26 July 2010 at 11:09 am

  4. I’m not sure of the legalities, but in this economy with the future looking so bleak, I think most job-seekers are in a very weak bargaining position, which of course employers love.



    26 July 2010 at 11:46 am

  5. That’s a very good point..the employee risk factor used as a bargaining chip.

    A point I wanted to bring up that I am sure you are aware of but it’s an important issue I think.

    Every time a merchant or in this case an employer does a credit query it can be either a medium to heavy ding on one’s credit score. So let’s say you go to 20 interviews over the course of 2 months.

    These hard queries that the prospective employers do, can quickly add up, as each query could be 4 to 5 points off the applicants score and as you can surmise the total could be as much as 80 points.

    This would take one from a good credit score to fair one or fair to weak or weak to poor very quickly. I see this as very unfair especially if they do a check on all three reporting agencies (Transunion, Experian and EquiFax”

    Obviously the queries that result in lowering the credit score would affect interest charges, high credit limits and have like a snowball effect.



    26 July 2010 at 1:24 pm

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