Pretty shady practice in growing use...

 

Concern about relevance

Job searches complicated by checking your credit

Monday, March 21, 2011  03:06 AM

By Mark Williams

 

THE COLUMBUS DISPATCH

 

Frustrated at the reticence of applicants' previous employers, companies seeking an indicator of their job candidates' character are turning to credit reports. Some also do regular checks on current employees.

 

The use of credit checks comes at a tough time for workers whose credit histories have been trashed after they lost a job in a tough economy. Getting their credit back on track might require getting a job, but that could be more difficult with a lousy credit history.

 

Read more at: http://www.dispatch.com/live/content/business/stories/2011/03/21/job-searches-complicated-by-checking-your-credit.html?sid=101

I've often wondered if I've missed out on jobs from having no credit rating. The fact that I don't borrow money really shouldn't exclude me from employment. It should show restraint and frugality, two qualities that are highly desirable in a candidate. I pay all my bills on time and my previous and current landlords all recommend me. It makes sense for a highly negative credit report to bounce someone, but this practice may not work in all situations.

Have you gone to one of the free credit reporting Web sites and actually looked for your credit rating?  It's a rare, rare individual indeed who has no credit rating whatsoever.  If you have utility bills, you probably have a credit rating, because they are serving you on credit--a short-term credit account usually with the equivalent of net 30 day terms in the commercial world, but credit nonetheless.

 

As for the practice of businesses running credit checks on prospective employees: I don't see anything particularly wrong with the practice, and in fact, it wouldn't surprise me if my current employer ran one on me before offering me my current job.  Then again, I'm an attorney, and I can see significant reasons why firms who ask clients to put them in positions of legal or financial trust (attorneys, accountants, investment firms, corporate boards of directors and officers, etc.) would have a strong interest in ensuring that their new hires were not habitually delinquent on bills.  High debts have led some professionals in such positions of trust to abuse their fiduciary capacities in the past.  It's extremely rare, of course, but not unheard-of ... and a single episode of such conduct can tarnish a firm's reputation that takes dozens or hundreds of people a generation or more to build.

 

I don't think that that concern applies equally to all professions.  That said, I think it would apply beyond fiduciary professions.  Is a bartender with $50k in credit card debt more than 90 days overdue more likely than one with sterling credit to be siphoning money from the till?  I honestly don't know, but if a business manager was more certain on that front than me (either way), I wouldn't want to gainsay his judgment.

I don't see anything wrong with the practice either.  And I would bet they are only looking for bad credit, and probably don't care if you have no credit history.

Have you gone to one of the free credit reporting Web sites and actually looked for your credit rating?  It's a rare, rare individual indeed who has no credit rating whatsoever.  If you have utility bills, you probably have a credit rating, because they are serving you on credit--a short-term credit account usually with the equivalent of net 30 day terms in the commercial world, but credit nonetheless.

 

As for the practice of businesses running credit checks on prospective employees: I don't see anything particularly wrong with the practice, and in fact, it wouldn't surprise me if my current employer ran one on me before offering me my current job.  Then again, I'm an attorney, and I can see significant reasons why firms who ask clients to put them in positions of legal or financial trust (attorneys, accountants, investment firms, corporate boards of directors and officers, etc.) would have a strong interest in ensuring that their new hires were not habitually delinquent on bills.  High debts have led some professionals in such positions of trust to abuse their fiduciary capacities in the past.  It's extremely rare, of course, but not unheard-of ... and a single episode of such conduct can tarnish a firm's reputation that takes dozens or hundreds of people a generation or more to build.

 

Right, in your specialization it wouldn't be unusual for them to probe your history, though I suppose for someone in your field having been bankrupt at one point and then emerging from it successfully could provide practical experience and help build a rapport with clients.

 

I did have a credit rating of 745 for a while; I signed up for a Firestone credit card in 2003 to save money on some tires and never used it again. Eventually it defaulted back to no credit rating. I found this out when I signed a lease for an apartment a couple years ago and had to get my folks to co-sign. What I do know is that back when I was an investment adviser we weren't checking prospective employee's credit ratings. Even so, my explanation for a lack of one would have went over well since making sure clients' everyday personal finances were in order is such a key aspect of that occupation.

Have you gone to one of the free credit reporting Web sites and actually looked for your credit rating?  It's a rare, rare individual indeed who has no credit rating whatsoever.  If you have utility bills, you probably have a credit rating, because they are serving you on credit--a short-term credit account usually with the equivalent of net 30 day terms in the commercial world, but credit nonetheless.

 

This isn't really true, FYI.  Generally speaking, you get zero credit history from making utility payments or paying rent, so many, many people, particularly working class people in low car ownership cities have no documented credit history.  You do, of course, get negative credit history if you fail to make these payments and the service provider/landlord reports your delinquency.

 

Interestingly, a few data aggregators/reporting agencies now offer alternative credit scores based on financial history (not just credit history), including rent and utility payment histories, to help people without mainstream borrowing histories qualify for a mortgage.  FICO offers its "Expansion Score" to serve this segment.

 

I agree with Hts though, lack of a credit history shouldn't be a problem with an employer- all it shows is that you never need to borrow money.

 

Interestingly, a few data aggregators/reporting agencies now offer alternative credit scores based on financial history (not just credit history), including rent and utility payment histories, to help people without mainstream borrowing histories qualify for a mortgage.  FICO offers its "Expansion Score" to serve this segment.

 

Those "in the know" have been able to seek underwriters to prepare mortgages for them without a credit history for years, but the concept doesn't seem to be a part of our national consciousness.