Top reasons that employers give for accessing, and why they are wrong

Here is a list of the reasons people give for wanting your credit report, and why those reasons are complete bunk.  This list comes from e-how (in bold), and my reasoning is in normal

 

Employment History
Employers check your credit in order to verify job history and identity, including your Social Security number.

What is the point of looking through employment history via credit report? In just about every single interview I have gone through, the employer always asks for at the very least, the numbers of the past employers, and in some cases the name of the supervisors in the application phase. There should be no need to double check, and there are more thorough ways to double check. Other background checking agencies will confirm this even more accurately than a credit report. At best this reason is redundant.

Credit History
Employers use credit reports to show loans, credit debt, and other financial obligations. These scores can show potential liability, as an employee who is heavily burdened by debt could be more likely to embezzle or steal.

Why should an employer care about your credit history? This is a huge invasion of privacy. The theory that a person is more likely to embezzle or steal is a fallacy. A person with a low score should actually be more likely to be a dedicated employee who understands the need for steady employment. Do you know that a criminal background check is more likely to tell if a person is inclined to steal?

Working for Financial Institutions and the Federal Government
Financial institutions will do background checks because most positions involve the handling and transfer of large sums of money. The federal government also does credit checks when the position is related to finance, and even can withhold a promotion due to high debt.

On the surface, this reason is the only one that makes sense; that is, until you consider the financial "responsibility" of the people that actually own these institutions. The recent issues with banking and finance should make it starkly clear that a credit score is absolutely not an indicator of a person's ability to handle money responsibly. All of the people that issued predatory loans, all of the people that instituted Ponzi schemes, all of the owners of the banks that not only are in serious trouble, but also keep getting positions within the government as advisors despite their patent stupidity with finances, and all of these other contractors and politicians that they keep revealing as people who have helped hand to us our current crises, all of these people had to go through and pass the scrutiny of their credit report. With the rampant corruption going on, why do we consider a credit report to be reliable as an indicator of financial responsibility? These jobs in finance and government work deal with money on a macroeconomic level. Economics 101 (since we were all in college we took this right?) Macroeconomics does not work the same way as microeconomics. A person's personal finances and the management thereof should have very limited bearing on the handling of money in public transactions. Besides, going back to the "embezzling risk" reasoning, a person in personal financial trouble should be less likely to want to risk their job, which pays a steady income. The more likely candidates for embezzling are the people who believe they are secure in their jobs.

Fear of Lawsuits
Employers who hire employees who steal are more likely to be sued than the employee who committed the theft. A simple background and credit check could limit a business's liabilities.

Here is a fear that should be absolutely thrown out. Fear of litigation is a terrible reason, and one that other sectors of society are slowly passing laws to prevent. It's already caused major trouble for the health industry and insurance industry, with the fear of frivolous lawsuits, and where it concerns discrimination and "reverse" discrimination, as in the case of ricci vs. Sefano, and also even in the media toward getting its facts straight vs. having the fear of being sued by congressmen in the NYT vs. Sullivan. Fear is defined as an emotional response to a perceived threat. This is a fear built upon the fallacy that the last two issues talked about. It is only an issue *if* a person steals, which credit reports are woefully inadequate of an indicator. More likely, once again, a standard background check would figure this out. Background checks don't include credit checks unless a person agrees to let them do it. There is always a separate waiver allowing credit checks, distinct from a waiver allowing background checks

Indicator of Responisbility
Employers believe that a high credit score is a good indicator of a reliable individual. When looking to promote employees to a position with greater responsibility, employers may do a credit check to make sure the employee is consistent and can be trusted to manage tasks.

Didn't we just address this? A person's personal finances have limited bearing on their on-the-job responsibility. Most of us with student loan debt, for example, were actually excersizing sound judgement and responsibility in attempting and succeeding at one or more degrees. It is a proven fact of modern society that a higher Ed. degree is vital in the workforce, yet with the downturn in the economy, or for a host of personal reasons (of which it is illegal for an employer to inquire) some people are forced into falling behind. Who are these employers to say that these people are irresponsible? The same goes for mortgage holders who were, say, laid off and failed to find employment, or people with long term health issues with medical bills (again illegal for an employer to inquire)

Consent
An employer must first get consent before they can run a background check on a prospect. Failure to comply, however, can have a more adverse affect on your application than if an employer were to see bad credit on your record. Go into the interview process knowing your credit ahead of time, and you will be in a better position to discuss potential problem areas and address hiring managers' concerns.

let's face it. If someone is given the option to consent, there should be no penalty for refusal. The reason we have to sign the consent form is because it is a privacy issue that the government recognizes, yet failure to give consent *always* results in a refusal to hire on the part of the employer. There are really two options to rectify this. Either make it mandatory for your privacy to be invaded, or make it illegal to do it altogether. The fact that you have to sign a waiver for release says to me that the practice is already pretty shady to begin with. If I had the choice, I would not sign.  

Liz pulliam has apparently wrote a book about issues relating to this. The article does mention the fact that employers have to tell you if something in your report caused them to deny you. the FTC tells us that we should discuss problems on the report with the employers, but lets think rationally about this. Items on the report could touch on subjects that it is illegal for an employer to discuss, i.e. Family, health, marital status, membership in organizations and churches, religious preferences, religious based volunteer work, racial relations, and private or social life. I ask the FTC why, if certain subjects are illegal to discuss, do you allow companies access to a report that can indirectly detail participation or inclusion or information on topics that are illegal to talk about in person?

The articles below on insurance use of the credit report and the congressional report just show you how the credit report is being abused to affect not only debtors, but everyone in society, especially considering most states now have laws on the books requiring car insurance, with a stiff penalty for being without it, and Congress as well as various states are considering health insurance (including two that have already passed mandatory heath insurance). this means that already, a bad credit report can prevent you from getting a loan for a car (a legitimate use of a credit report) but it can also jack up the rates of car insurance to levels that make it impossible to drive legally (an illegitimate use, considering that a majority of Americans are dependent on a car to continue gainful employment). The same could easily happen if healthcare is made mandatory nationwide. Credit reports simply have to go before this should be discussed.

The infamous pirates of the crab shack is the Credit report commercial that starkly paints the image of today's young educated unemployed underclass. In the commercial's defense it is about identity theft, but I have friends who have suffered identity theft. The reality is that even if you want to contest identity theft when you discover it, it is already too late for you. Someone stole my friend's identity and ran up credit cards, which cost her a job as a science teacher in a public school. The state refused to deal with her case in a timely manner. Even contested, the items remain on her report, preventing her from working gainfully.

It is very bad for victims of identity fraud, but low credit scores and black marks on a credit report are a fact of life for most of us struggling to get a job and pay back the albatross of debt that hangs around our necks. We really do wind up working at unskilled jobs because we are denied the employment we are qualified to do all because of a report and a a number, and a pretense of consent to allow a massive invasion of privacy

Article about reasons why bad credit costs jobs:
http://articles.moneycentral.msn.com/Banking/YourCreditRating/how-bad-cr...

Federal Trade Commission talking about the reasons:
http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt053.shtm

An example of a company (progressive) using credit reports in their insurance equations
http://www.progressive.com/shop/car-insurance-credit-scores.aspx

Article about credit reports and insurance:
http://www.consumeraffairs.com/news02/ins_credit.html

Congressional report on credit based insurance scores (I haven't read all of this yet)
http://www.ftc.gov/os/2007/07/P044804FACTA_Report_Credit-Based_Insurance...

The infamous Credit report pirates:
http://www.youtube.com/watch?v=zMXv0__CYSU&feature=PlayList&p=DC0044277C...

Article about reasons why bad credit costs jobs:
http://articles.moneycentral.msn.com/Banking/YourCreditRating/how-bad-cr...

Federal Trade Commission talking about the reasons:
http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt053.shtm

An example of a company (progressive) using credit reports in their insurance equations
http://www.progressive.com/shop/car-insurance-credit-scores.aspx

Article about credit reports and insurance:
http://www.consumeraffairs.com/news02/ins_credit.html

Congressional report on credit based insurance scores (I haven't read all of this yet)
http://www.ftc.gov/os/2007/07/P044804FACTA_Report_Credit-Based_Insurance...

The infamous Credit report pirates:
http://www.youtube.com/watch?v=zMXv0__CYSU&feature=PlayList&p=DC0044277C...

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