

The Long Shadow of Bad Credit in a Job Search - Futurebot
http://www.nytimes.com/2013/05/12/business/employers-pull-applicants-credit-reports.html?ref=business&pagewanted=all

======
georgemcbay
We've (very recently... in my lifetime) created a society in the US where it
can be almost impossible to distance yourself from early mistakes. Or in the
case of the guy here, something that isn't even a mistake you made really but
a failing of our horrendous health care situation.

While there are sometimes systems in place to deal with this (eg. the 7 year
window after which most things fall off credit reports), there's a nasty
feedback loop that can't really be accounted for with statutes of limitations.
"Ok, you don't have a $40,000 charged off medical bill due anymore, but why
weren't you working for the past 7 years?"

It isn't just with credit either, I commented on something semi-related about
a month ago here: <https://news.ycombinator.com/item?id=5433720>. While there
are positive aspects to this permanence in some cases, there's a lot of
negative too.

~~~
michaelochurch
The main moral debate going on with regard to employment is what it's OK to
have happen to someone who's unlucky, and how much regulation we're willing to
put in place to protect those who are unlucky.

Most people who have bad credit were unlucky. They had unexpected losses of
income or medical problems that their insurers wouldn't cover. However, most
people would agree that it's OK for someone to be denied a house loan or
credit card because of bad luck in the past. Loans aren't rights. They aren't
necessities for living. If you can't get a mortgage, rent. It sucks to have
your housing choices thus limited, but it's not exactly a life-wrecking
catastrophe.

Jobs are different. Society has agreed, repeatedly, that bad luck shouldn't
make a person unemployable; that everyone has the right to seek appropriate
work. We make black-listing illegal and non-compete agreements non-enforceable
(if they preclude employment outright as opposed to actual bad-faith
competition) for that reason.

The problem is that there are a lot of companies that don't want to play by
these rules. They really want to be like the comic-strip boss who throws two-
thirds of the resumes in the trash and says, "I don't want to work with
unlucky people".

What I think people should do, personally, if they meet onerous follow-on
request is to fake time pressure (or use real time pressure if it exists). "I
have a Friday deadline on an offer, and won't be able to turn it down unless I
have an offer letter from you."

If the offer letter says, "contingent on <X>" where X is something onerous
(like a credit check for a non-finance job) then you may want to ask what you
get if you don't get the offer, negotiate until it's acceptable (again with
the time pressure) and get that in writing.

~~~
jiggy2011
That can work if you have leveridge , for example having a high demand
skillset where they do things like "offers in writing".

If you are a kid trying to get minimum wage job with bad credit they'll
probably just move on.

~~~
michaelochurch
Yeah, you're almost certainly right. It only works if they need people, and
then they probably aren't wasting time with long search processes.

------
rayiner
One aspect of using credit scores for employment is that its monumentally
discriminatory against people from lower income backgrounds. My (now-) wife
and I ran out of money at the end of the semester during law school a number
of times. A quick bailout from the bank of daddy was all it took to fix the
problem without hurting our credit. People whose parents have money generally
don't ruin their credit while young. People who don't can get in a lot of
trouble with exactly the same level of responsibility.

~~~
rm999
Lenders don't want poor people to have low credit scores per se - they want
people who won't pay back their loans to have low credit scores (I know it's
sort of obvious, but I know this for a fact because I've worked with/around
credit score modeling). The lack of money and the inability to pay back loans
just happen to correlate very strongly so poor people are more likely to have
lower scores.

In your case the credit score worked as intended because the "bank of daddy"
will also likely be there in the future. You may have an unfair advantage, but
that advantage is you were born with money; the fact that your credit score is
higher is just a direct result of this.

edit: I should make it clear that I'm not talking about using credit scores
for employment, which I think is absolutely discriminatory and misguided from
the employer's perspective.

~~~
farinasa
So it makes me wonder if he paid income taxes on that money. My guess would be
no. I would guess the situation is similar for all those born with money. This
makes this advantage doubly unfair.

~~~
rayiner
Gifts aren't taxed until a lifetime limit of $5 million is exceeded, after
which anything above $13k/year is excluded.

------
tptacek
Does anybody at all on HN think that pulling credit reports on candidates is a
reasonable thing for hiring firms to do, outside of a very few roles and an
even smaller set of companies (trading exchanges, for instance) with genuine
and easily documented concerns about embezzlement or susceptibility to
bribery? My point being: no, I don't think anyone here thinks widespread
credit report pulling is reasonable.

Was anyone on HN unaware of the fact that some companies do request
authorization to pull credit reports during the hiring process? I'd be
surprised, but maybe there are.

Obviously, my subtext is: what is this post doing on HN?

~~~
jerrya
It helps to talk about it.

Even if we all agree the practice is malodorous, without public discussion of
it, we are apt as individuals to concede to it as we believe we have no
alternatives.

It's similar to the puzzle interviews which are controversial and many people
here dislike. By talking about it, by raising it and discussing again and
again their negatives, it helps raise awareness of strategies on how to avoid
them, what to do when one is encountered, and can even raise awareness in
people that do like them as to why they are problematic and encourage them to
find alternatives within their company.

FWIW, I think credit pulls are obnoxious, and even so, yes, I have been asked
to consent to them as well as background checks for jobs which should not need
them at any time.

And it's Saturday.

~~~
illuminate
A better comparison would be required non-competes, puzzles aren't nearly as
harmful as either.

------
csense
Companies that deny people jobs based on factors that don't directly affect
job performance (credit report, race, whatever) will have their lunch eaten by
those who don't.

In other words, not hiring Mr. Carpenter represents a missed opportunity for
those companies. If an experienced dress shoe salesman normally brings down
$25 an hour, but Mr. Carpenter is desperate and willing to work for $20 an
hour instead, the company that doesn't care about his credit and hires him
anyway can save $5 on their hourly labor costs.

In fact, as long as Mr. Cooper is underbidding, it doesn't matter how much he
underbids; hiring him is still a win-win situation if he asks for $24.75 an
hour.

Why does this problem need regulatory solutions when plain old capitalism will
do?

On the other hand, if we empirically observe that Mr. Cooper can't find a job,
why does the theory above fail to hold in the real world?

~~~
jiggy2011
The "invisible hand" often works very slowly. By which time Mr Carpenter has
been out of work for 3 years and is no longer the hot property he once was.

~~~
csense
I doubt that shoe salesmanship skills become obsolete anywhere near as fast as
web development skills.

------
jstalin
If a potential employer decides not to hire you based on a credit report, they
are required to notify you of that fact and the fact that you have a right to
get a copy of your credit report.

This sounds like a juicy area to start suing employers that don't follow the
law.

<https://www.emplscreen.com/Notice1.pdf>

~~~
gwern
> This sounds like a juicy area to start suing employers that don't follow the
> law.

How do you establish an employer didn't hire you because an HR person saw your
credit report and didn't like it?

~~~
kabdib
See if they pulled the report. They could go through an intermediary, but you
could make that unlawful (the current credit agencies are one step just above
"hearsay" anyway) and aggressively enforce it.

Not that it would happen.

~~~
gwern
Would that be sufficient for a court of law, that merely the company ordering
it is sufficient to incriminate them?

------
balabaster
Why don't you just NOT check the "Allow them to check my credit" box? Your
financial well-being is nobody else's business - except perhaps your spouse,
your accountant and your potential creditors.

~~~
Zak
Most people probably think doing so will also reduce their chances of being
hired. They're probably right.

~~~
balabaster
...and it still seems to me that the easiest way to get hired for a job is to
work hard to be the best at whatever it is you do. Then when someone thinks
"Oh, we need someone to do X job, everyone says 'This is the guy you need',"
instead of having to go in through the front door like the rest of the
unknowns. Your reputation should already have walked in the door long before
you even know there's a job there for you. At that point, nobody looks at or
cares about your credit.

~~~
Zak
That works for the kind of people who frequent HN. With lower-end jobs, there
may not be a large enough difference between average and best to matter. Most
of the people interviewed for the articles were seeking relatively unskilled
positions.

------
chevas
FICO is crap. All it does is indicate how well you borrow and pay it back.
Your credit score should not be a measure of how well you "do what you say you
are going to do" -- which is what it has become. The guy in this article is
case-and-point--he had a run of bad luck.

There are better ways to measure one's reliability and maybe someone here can
disrupt the transunion-equifax-experian trifecta or create a new business out
of measuring candidate quality for all kinds of things (rentals, jobs, etc.)
that doesn't rely on debt. Even the person who is self-made / cash-only has to
contend with this buffoonery.

~~~
eldavido
Agree 100%. There's a more general notion of conscientiousness [1] that,
without evidence, seems the really deep, meaningful thing we should measure.
Credit score is crappy because cash-only people won't have it and it's
effectively monopolized by three data providers with who-knows-what for
commercial/financial incentives.

[1] <http://en.wikipedia.org/wiki/Big_Five_personality_traits>

------
zimbatm
In the UK, I didn't see another company than Experian doing credit reports.

To know your credit report, you have to subscribe to a 30-days-free-
then-£14.99-per-month thing. And they ask you for tons of info that they can
use to improve their file on you. Every time that a business asks a credit
report on you it lowers your score for a while. I'm sure the businesses are
also paying to get access to your credit report as well.

It seems to be a very lucrative business.

------
learc83
Businesses don't use IQ tests in general because the tests have a racial bias.

Considering that income and debt to income ratio are racially skewed as well,
wouldn't credit reports display the same bias, and require that companies
prove that there is a legitimate business case in order to use them?

~~~
Estragon
It's unethical (and stupid) to use IQ tests for hiring decisions because they
have very little predictive power with respect to job performance. If a
measure has such predictive power, it's not necessarily unethical to use it
just because it also correlates with race.

I don't actually know whether bad credit is predictive for job performance,
though the story for why it might be is easy to imagine.

~~~
yummyfajitas
_It's unethical (and stupid) to use IQ tests for hiring decisions because they
have very little predictive power with respect to job performance._

This is incorrect.

[http://www.siop.org/workplace/employment%20testing/testtypes...](http://www.siop.org/workplace/employment%20testing/testtypes.aspx)

[http://mavweb.mnsu.edu/howard/Schmidt%20and%20Hunter%201998%...](http://mavweb.mnsu.edu/howard/Schmidt%20and%20Hunter%201998%20Validity%20and%20Utility%20Psychological%20Bulletin.pdf)

[http://geb.uni-
giessen.de/geb/volltexte/2012/8532/pdf/prepri...](http://geb.uni-
giessen.de/geb/volltexte/2012/8532/pdf/preprint_j.1468_2389.2010.00485.x.pdf)

 _If a measure has such predictive power, it's not necessarily unethical to
use it just because it also correlates with race._

This is true. While certainly ethical, it is still illegal in the US.

~~~
walshemj
If its illegal by definition it can not be ethical.

~~~
geoffschmidt
So Rosa Parks was the bad guy?

~~~
yummyfajitas
A charitable interpretation of walshem's comment would be that he believes her
actions were _moral_ but not _ethical_.

~~~
walshemj
mm I take your point but I would quote sewards "higher law" and the UNHCR as
overriding Jim crow laws

------
amalag
Too many applicants if they can discriminate on that. Those positions will be
filled by someone.

------
rdl
A lot of the reason to run a credit check as part of NACLC is to get a list of
addresses and thus to help with the national/local agency checks part of the
process.

I'd find it hard to care if someone had a $50k medical debt and bankruptcy,
particularly if disclosed before it was required, but knowing someone lived in
Florida and had outstanding Florida warrants for check kiting and identity
theft (sigh; I had this happen!) would be useful, and derived from the credit
report.

I actually had to pay off some 6 year old disputed $20 collection agency stuff
right before I did NACLC myself, just to make it cleaner.

------
onemorepassword
I don't endorse doing credit checks on candidates, and it's certainly not
something I would ever do myself, but I can testify to the fact that employees
with financial problems can be an incredible drain on the company and can have
a major negative influence.

I do however live in a country with strong social security and healthcare, so
financial problems are relatively more often the result of personal issues
rather than just bad luck.

~~~
jiggy2011
How were they drains on the company? Was it just correlation between financial
problems and people who were a "drain" or where they continually asking for
extra pay or stealing things to pay back debts?

------
nraynaud
I've been told that having no debt at all is like having a bad credit score in
the US, and a bad credit score is a big problem for a lot of stuff like
renting a house, is it true? I'm thinking about emigrating there, so it might
be a big issue.

~~~
rollo_tommasi
That's not quite accurate. Having no _credit history_ is typically a flag, not
having no current debt.

~~~
nraynaud
I don't get the difference, can you detail please?

~~~
eldavido
(Good) credit history happens from a repeated pattern of meeting one's
financial obligations, including mortgage payments, utility bills, student
loans, car payments, etc., and not doing financially reckless things like
overdrawing bank accounts, skipping town, etc.

Generally one needs to have owed money to have a credit history, but this
isn't the same as not having debt.

~~~
nraynaud
but isn't the fact of having never borrowed money, and have always saved
before buying stuff even safer than taking any obligation whatsoever? also,
paying your phone bill on time gives you a good credit rating?

~~~
ImprovedSilence
>> paying your phone bill on time gives you a good credit rating

I don't know about phone bills, but electric and gas bills, yes. Also, so does
being signed to a lease and paying rent. And as stated above, just having a
credit card, even if you only charge like $20/month and pay it off every month
will help tremendously.

~~~
lawnchair_larry
Neither of those are true actually. Phone companies check your credit, but
they don't report back, unless it's negative information due to collections.
Neither does paying rent.

You only get positive information on your credit report for loans, credit
cards, lines of credit.

------
venomsnake
Seems like blind auditions for every job are some basis for a solution for
company above certain size.

<http://en.wikipedia.org/wiki/Blind_audition>

~~~
jiggy2011
How would that work outside of music?

~~~
venomsnake
Employers are forbidden from collecting any information about the employees
outside of expertise.

------
rquantz
Does anyone know if this is a common factor in hiring programmers? I would
expect not given the job market, but I havent applied for a job in a few
years.

~~~
EmmEnnEff
I've underwent three credit checks, for the past 3 jobs I took. (Two US-owned
Canadian branches, and a Valley megacorp)

