How Employer Credit Checks Keep Black People Unemployed

[summer]

www.theroot.com/articles/politics/2015/03/how_credit_checks_keep_black_people_unemployed.html

When New York State Attorney General Eric T. Schneiderman announced that his office had cut a deal with the three big credit bureaus—Experian, Equifax and TransUnion—to improve the customer experience, the news shook the financial-services world into a frenzy.



“In today’s world, the consumer’s input is less important than the bank or collector’s input,” John Ulzheimer, an expert at CreditSesame, told the New York Times. “The attorney general’s settlement changes that.”



But for people of color, this is nothing to text home about. The untold, untouched and unaddressed silent crisis widely ignored by policymakers is how credit checks are used to discriminate against job seekers.



In fact, employer credit checks could be a major factor in chronic underemployment in the postrecession world or in the inability of capable and qualified folks to land a full-time gig. While most are too embarrassed or frustrated to say it, African Americans are the hardest hit by rampant poor credit, especially since many are still struggling to recover from the downsizing, foreclosures and unpaid bills of the Great Recession.



And you can’t get out of debt if you can’t get a job. As a result, the recent overhaul of credit bureaus may do little to solve the vicious cycle that confronts many African Americans, not until the system eliminates callous employer credit checks as job-suppression tools. While these newly announced changes seek to offer reprieve on unpaid medical bills and the error-correction process, they go nowhere near banning the sinister credit-check-for-employment practice.



“The most insidious and alarming part of the rise in credit-check use stems from its ostensibly race-neutral facade,” New America Foundation’s Hannah Emple explains. “People of color are more likely to have poor credit because of historical and contemporary forms of discrimination that limit educational, employment, borrowing and housing opportunities.”



Emple views credit-check-based employment decisions as a way of “operationalizing racial discrimination in a supposedly race-neutral way that will [unfortunately] stand up to legal scrutiny until we make it illegal.”



That’s what a 2012 Demos National Survey on Credit Card Debt found when it examined low- and middle-income households: One out of 10 unemployed workers reported credit checks kept them out of a job. That ratio is considerably higher for African Americans, among whom only a quarter of black households report credit scores of 700 or above.



Sure, the Fair Credit Reporting Act permits employment credit checks. But as Demos reports, “[C]redit reports were not designed as an employment-screening tool.”



And neither Congress nor the White House has taken any steps toward eliminating the widespread practice—although nearly half of all employers are doing it. There is grumbling that the Obama White House virtually ignored legislation introduced over the past few years that would put a cease-and-desist on the credit check as a barrier to employment.



“Using a job applicant’s credit history to deny employment is not fair because personal credit history is not an accurate predictor of job performance,” says Rep. Steve Cohen (D-Tenn.). Last session of Congress, Cohen snagged 30 sponsors for his Equal Employment for All Act (H.R. 645), which would prohibit employers from using credit checks except in cases of national security, Federal Deposit Insurance Corp. clearance, or major responsibility over employer and employee finances. He represents Tennessee’s largest and most predominantly black city: Memphis. According to a 2012 Experian survey of cities and their average credit scores for residents, Memphis is ranked in the bottom 10.



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“Second chances in Hollywood and professional sports occur every day, but not for my constituents who are desperately looking for work,” added Cohen.



Rep. Maxine Waters (D-Calif.), ranking member on the House Financial Services Committee, is also worried about how much credit is wrecking second chances, especially since she’s representing one of California’s largest concentrations of people of color. Way ahead of the New York attorney general’s settlement, Waters introduced her Fair Credit Reporting Improvement Act of 2014 back in September. The bill would have reduced bad credit scores from seven to four years while also removing settled debts.



As long as the credit bureau industry has all sorts of skin in the political game, bills like those above won’t have much chance clearing committee. Experian leads the pack with nearly $3 million in combined campaign contributions and lobbying in Washington since 2013. Equifax is not too far behind at nearly half that amount.



In the end, as the Center for American Progress’ Joe Valenti argues, bad credit doesn’t translate into bad employee performance. “There are studies showing that if you are undergoing financial distress, you are going to be much more likely to pay off your debt,” Valenti explains. “If credit is keeping you out of a job, that’s only going to put you deeper and deeper into debt.”



Which is why the current system makes absolutely no sense. But then again, chattel slavery made sense to quite a few people 400 years ago, didn’t it?

[ttt]

Credit checks for employment make me absolutely furious. So unnecessary and so invasive. I really can't believe it's still legal to do this.

[penguingrrl]

I don't understand credit checks as a basis for employment. If someone has been out of work or underemployed it goes to stand that they may have been forced to make decisions they otherwise wouldn't with their personal finances due to going through a difficult time. To then make it that much harder for them to get out from under that debt by using the debt to tell them they're unemployable is awful.

[ESF]

It is a racket.

Criminal records checks only compound the problem. Criminal background reports make credit reports look amazingly accurate in comparison. There are no federal laws prohibiting the use of criminal records in employment decisions, and so it is up to states to regulate. Some regulate, but errors are out of control. Some states prohibit listing arrests that don't lead to convictions/guilty pleas. Given the rate at which black men are wrongfully arrested and accused, there are a lot of states in which driving while black will keep you unemployed for life.

The entire system needs to be reformed.

[thejackpot]

Yeah, credit checks seems really unnecessary and invasive..

[secretlyevil]

I don't understand how credit checks are necessary for employment.

[ESF]

Mar 29, 2015 17:17:28 GMT -5 ttt said:

Credit checks for employment make me absolutely furious. So unnecessary and so invasive. I really can't believe it's still legal to do this.

Here is why it is legal.

Credit reporting agencies also sell credit monitoring and protection services. They have no incentive to clean up reports because they make more money selling services to people who are worried about their credit. If their credit reports were accurate, they wouldn't pay for the monitoring services.

Most people who aren't about to buy a house or take a car loan aren't really thinking about their credit. So the market for credit monitoring services is pretty small. The way to make it bigger is to make credit reporting more routine, and make a lot more people care about their credit on a day to day basis.

So they push it to employers, offering reports at a super cheap rate, making it a cost effective way to weed out tons of applicants.

We need a law prohibiting credit reporting companies from selling credit monitoring services. It is an inherent conflict of interest. If you do that, then credit reports will become very expensive because they won't have other ways to make money, and will only be pulled when actually necessary to check credit.

[calmcosmo]

I know it's a huge deal with security clearances too. Not only can bad credit prevent employment, it can also majorly derail a career. When we are interviewed for friends when they are getting their security clearances renewed one of the first questions they ask is about our perception of their financial health and decision making.

[cookiemdough]

I would be curious to know the stats in terms of the number of people who actually defraud their employer with bad credit. I would venture there a ton of people with bad credit who have no intention of committing a crime.

[irishbride2]

Mar 29, 2015 17:41:18 GMT -5 secretlyevil said:

I don't understand how credit checks are necessary for employment.

I get it for some jobs. For example j wouldn't want a financial advisor with a history of terrible credit.

[ttt]

Mar 29, 2015 19:13:39 GMT -5 cookiemdough said:

I would be curious to know the stats in terms of the number of people who actually defraud their employer with bad credit. I would venture there a ton of people with bad credit who have no intention of committing a crime.

And similarly, people who have committed crimes against their employers or customers and who had excellent credit. Enron, anyone? THE ENTIRE GODDAMN BANKING INDUSTRY??

[cookiemdough]

Mar 29, 2015 19:14:42 GMT -5 irishbride2 said:

Mar 29, 2015 17:41:18 GMT -5 secretlyevil said:

I don't understand how credit checks are necessary for employment.

I get it for some jobs. For example j wouldn't want a financial advisor with a history of terrible credit.

I get it in theory, but I have good credit as a result of making the bad financial decision to continue paying on my house that has little to no chance of recovering its value.

[irishbride2]

Mar 29, 2015 19:18:24 GMT -5 cookiemdough said:

Mar 29, 2015 19:14:42 GMT -5 irishbride2 said:

I get it for some jobs. For example j wouldn't want a financial advisor with a history of terrible credit.

I get it in theory, but I have good credit as a result of making the bad financial decision to continue paying on my house that has little to no chance of recovering its value.

It's not that I think good credit means they are making good financial decisions it's more worrying about employing someone that is trustworthy with someone else's money and isn't running off to the caymans

[vadasultenfuss]

I have a student whose family is, in my opinion, ruining his credit. I know the apartment is in his name as are some appliances, if not furniture too. It pisses me off on so many levels, since I know it could have negative implications for future employment, in addition to other things.

[ttt]

Mar 29, 2015 19:21:12 GMT -5 irishbride2 said:

Mar 29, 2015 19:18:24 GMT -5 cookiemdough said:

I get it in theory, but I have good credit as a result of making the bad financial decision to continue paying on my house that has little to no chance of recovering its value.

It's not that I think good credit means they are making good financial decisions it's more worrying about employing someone that is trustworthy with someone else's money and isn't running off to the caymans

But is someone with bad credit necessarily less trustworthy? Is a credit score really a good Indicator of someone's moral character and integrity??

[miniroller]

Mar 29, 2015 19:58:37 GMT -5 vadasultenfuss said:

I have a student whose family is, in my opinion, ruining his credit. I know the apartment is in his name as are some appliances, if not furniture too. It pisses me off on so many levels, since I know it could have negative implications for future employment, in addition to other things.

Ugh! This makes me sick. And it's not like he's going to take his mom to court to begin the rigorous process of getting his record cleared. This is an instance I hadn't even thought about re: credit checks for employment. Just went from a little against to very against

[irishbride2]

Mar 29, 2015 20:08:43 GMT -5 ttt said:

Mar 29, 2015 19:21:12 GMT -5 irishbride2 said:

It's not that I think good credit means they are making good financial decisions it's more worrying about employing someone that is trustworthy with someone else's money and isn't running off to the caymans

But is someone with bad credit necessarily less trustworthy? Is a credit score really a good Indicator of someone's moral character and integrity??

I mean as much as anything else.

I don't want someone with recent major money issues in charge of my money. I don't see how that's remotely crazy. I never said it defines their character.

[cookiemdough]

Mar 29, 2015 20:17:11 GMT -5 miniroller said:

Mar 29, 2015 19:58:37 GMT -5 vadasultenfuss said:

I have a student whose family is, in my opinion, ruining his credit. I know the apartment is in his name as are some appliances, if not furniture too. It pisses me off on so many levels, since I know it could have negative implications for future employment, in addition to other things.

Ugh! This makes me sick. And it's not like he's going to take his mom to court to begin the rigorous process of getting his record cleared. This is an instance I hadn't even thought about re: credit checks for employment. Just went from a little against to very against

Years ago my cousin set up an apartment in my name and bailed on it. I found out when I graduated from college and moved for my first job after school. I got some letter indicating i was being sued. I got it straightened out but there was nothing more embarrassing than when I had to air to my employer that my cousin did this because I knew they would check my credit. Since credit agencies actually don't care if what they are reporting is correct I have a hard time thinking they provide a service that is worthwhile. The hoops I had to jump through to get it fixed were ridiculous.

[ESF]

Mar 29, 2015 20:24:05 GMT -5 irishbride2 said:

Mar 29, 2015 20:08:43 GMT -5 ttt said:

But is someone with bad credit necessarily less trustworthy? Is a credit score really a good Indicator of someone's moral character and integrity??

I mean as much as anything else.

I don't want someone with recent major money issues in charge of my money. I don't see how that's remotely crazy. I never said it defines their character.

At the end of the day, I could get behind a compromise that allowed credit checks for most positions in the financial services industry and maybe a discrete number of other jobs where there's access to very sensitive information. I suspect for most of these jobs, credit worthiness is unrelated to job abilities, but provided the carve out is narrow, it is not a battle worth fighting.

It's really the fact that they can be performed for any job without justification that is the problem.

Fun fact: I only ever interviewed at one place that did credit checks as part of the employment process. It was at an organization that now lobbies to ban credit checks as part of the employment process.

[ttt]

Mar 29, 2015 20:24:05 GMT -5 irishbride2 said:

Mar 29, 2015 20:08:43 GMT -5 ttt said:

But is someone with bad credit necessarily less trustworthy? Is a credit score really a good Indicator of someone's moral character and integrity??

I mean as much as anything else.

I don't want someone with recent major money issues in charge of my money. I don't see how that's remotely crazy. I never said it defines their character.

You did use the word trustworthy though. Is someone with a 620 credit score less trustworthy than a person with a 750 credit score? Is a person with a 750 less likely to steal your money?

[ringstrue]

Credit scoring is such a racket. You can have great investment planning and budgeting out the wazoo and have bad credit because you don't have any credit cards. You can have awesome credit and be terrible with budgets. I don't see how credit score can be tied to finance skills, trustworthiness, etc. if anything it just means you know how to play the game and had the financial opportunity to play it right.

[irishbride2]

Mar 29, 2015 20:53:38 GMT -5 ttt said:

Mar 29, 2015 20:24:05 GMT -5 irishbride2 said:

I mean as much as anything else.

I don't want someone with recent major money issues in charge of my money. I don't see how that's remotely crazy. I never said it defines their character.

You did use the word trustworthy though. Is someone with a 620 credit score less trustworthy than a person with a 750 credit score? Is a person with a 750 less likely to steal your money?

Absolutely? Of course not. Nothing is absolutely. But like any.other.measure, yes I would think there is a correlation of sorts if the credit history shows related issues. You can see why someone has low credit.  hell H is an FA with an issue on his credit (100% due to the credit agencies making a mistake that we are litigating). So I get it. Shit happens. But that is why looking at the why is important. It shouldn't be a litmus test. 

What should we use to hire someone? Just an interview? Because that isn't 100%. Just recommendations? That sure as hell isn't. 

Every job is different and different measures can help paint a picture. I do not think credit histories are 100% terrible. 

I guess I'll be alone in that boat. 


eta: in terms of using "trustworthy" i thought the multiple smiley faces indicated the TIC nature of the cayman's post. So I apologize if that wasn't clear.

[pamela]

I know we credit check because someone in deep trouble financially can be more easily influenced by money from a potential terrorists.

[jln]

Mar 29, 2015 21:04:12 GMT -5 ringstrue said:

Credit scoring is such a racket. You can have great investment planning and budgeting out the wazoo and have bad credit because you don't have any credit cards. You can have awesome credit and be terrible with budgets. I don't see how credit score can be tied to finance skills, trustworthiness, etc. if anything it just means you know how to play the game and had the financial opportunity to play it right.

Luckily DH isn't in a field that does credit checks before employment because this is our exact situation.  We make good money, pay all our bills on time but have zero debt.  No car loans, credit cards, nothing.  But, we now have lowered credit scores because we don't have any credit - which makes zero sense.  So we had to get a little credit card just to up our credit score.  Which is insane to me, especially in a country where debit is such a huge problem for many people.

I strongly disagree with credit checks for employment.  I just don't see it as necessary for most fields.  

[ESF]

Here's what I don't get. Are they looking at credit scores or debt? Because those are two very, very different things.

Someone can have 700+ credit score and owe hundreds of thousands of dollars, be underwater on their house, have zero in retirement savings and generally be up shit creek without a paddle.

Someone with a credit score in the toilet could have oodles of money, very little or no debt, and just suck at keeping a calendar and managing their own personal affairs.

You want to run a credit report because someone is handling sensitive stuff and you want to make sure they are who they say they are? Fine. I can maybe accept that for certain jobs, there is a need to due diligence in someone's background. Not many, but sure,nome.

But this idea that someone with a 750 credit score is a better money manager and less likely to join ISIS than someone with a 600 is crazy to me.

[ttt]

Mar 29, 2015 21:13:34 GMT -5 irishbride2 said:

Mar 29, 2015 20:53:38 GMT -5 ttt said:

You did use the word trustworthy though. Is someone with a 620 credit score less trustworthy than a person with a 750 credit score? Is a person with a 750 less likely to steal your money?

Absolutely? Of course not. Nothing is absolutely. But like any.other.measure, yes I would think there is a correlation of sorts if the credit history shows related issues. You can see why someone has low credit.  hell H is an FA with an issue on his credit (100% due to the credit agencies making a mistake that we are litigating). So I get it. Shit happens. But that is why looking at the why is important. It shouldn't be a litmus test. 

What should we use to hire someone? Just an interview? Because that isn't 100%. Just recommendations? That sure as hell isn't. 

Every job is different and different measures can help paint a picture. I do not think credit histories are 100% terrible. 

I guess I'll be alone in that boat. 


eta: in terms of using "trustworthy" i thought the multiple smiley faces indicated the TIC nature of the cayman's post. So I apologize if that wasn't clear.

I just don't think credit should play a role in hiring. First of all, all it does is show how well you play the game - credit scores measure how attractive a customer you are to lenders, period. That's what they're designed for, that is their function.

Second, looking at the "why" opens up a huge can of worms. Is it due to errors? Okay, but do you take the employees word for it? Or maybe it's due to a period of unemployment and financial difficulty. Maybe there was a divorce. Or maybe it's because the employee had a serious illness and incurred major debt. Should you as a candidate be required to disclose that to a company? Or should you feel pressured to do so?

Frankly, it's none of an employers business. And it has no bearing on how well you can do a job or whether you're trustworthy as a person or not.

The entire industry angers me already, and the use of this in employment just infuriates me.

[cookiemdough]

Mar 29, 2015 21:23:10 GMT -5 pamela said:

I know we credit check because someone in deep trouble financially can be more easily influenced by money from a potential terrorists.

I guess this is where I was wondering if there are stats that support this. Are there people selling secrets to terrorists cause their MasterCard was late?

[pamela]

Mar 29, 2015 22:05:06 GMT -5 cookiemdough said:

Mar 29, 2015 21:23:10 GMT -5 pamela said:

I know we credit check because someone in deep trouble financially can be more easily influenced by money from a potential terrorists.

I guess this is where I was wondering if there are stats that support this. Are there people selling secrets to terrorists cause their MasterCard was late?

A few late payments aren't going to disqualify you. They look for are you in over your head. They look at the actual report, not a score.

[ttt]

Mar 29, 2015 22:09:56 GMT -5 pamela said:

Mar 29, 2015 22:05:06 GMT -5 cookiemdough said:

I guess this is where I was wondering if there are stats that support this. Are there people selling secrets to terrorists cause their MasterCard was late?

A few late payments aren't going to disqualify you. They look for are you in over your head. They look at the actual report, not a score.

I'm also curious as to whether there are statistics on this showing that people with financial difficulties have actually committed more security breaches or problems than those without.

[summer]

Mar 29, 2015 19:17:46 GMT -5 ttt said:

Mar 29, 2015 19:13:39 GMT -5 cookiemdough said:

I would be curious to know the stats in terms of the number of people who actually defraud their employer with bad credit. I would venture there a ton of people with bad credit who have no intention of committing a crime.

And similarly, people who have committed crimes against their employers or customers and who had excellent credit. Enron, anyone? THE ENTIRE GODDAMN BANKING INDUSTRY??

Girl, for the cheap seats!

People in finance may have great credit but be morally bankrupt. Whole institutions can be morally bankrupt. A credit score is never going to show a person how ethical another person is. That's how our country ended up in this place where being poor = you have some moral deficit, therefore bootstraps.