Category: Media

Credit score, employers, San Francisco Chronicle

From: Greg Fisher, creditscoring.com
Sent: Wednesday, September 15, 2010, 7:21 AM
To: Amy Fontinelle, financial journalist and editor
Subject: credit score, employers, San Francisco Chronicle

You wrote, “Insurance companies, landlords and employers may also look at your credit score to see how financially responsible you are before issuing an insurance policy, renting out an apartment or giving you a job. ”

Who is your source regarding credit score use by employers?

Greg Fisher
The Credit Scoring Site
creditscoring.com
PO Box 342
Dayton, Ohio  45409-0342

What is THE average credit score?

Last month, in what seemed like a big scoop over its rival news agencies, the Associated Press reported that, now, 25.5% of Americans have FICO scores below 600.  But, the score model in that report is a new score, FICO 8 (BEACON 09), which is not sanctioned by the two big housing finance agencies, nor even the one sold to consumers by the main scoring company.  The story stuck.  Following questioning by creditscoring.com, FICO (the company) removed FICO (the score) distribution charts from its website.

This month, rival news agency Reuters struck back.  On Friday, in her story “Scorning debt, consumers’ credit scores soar,” Helen Chernikoff wrote, “The average credit score rose to 704 in July, a level not seen since the first quarter of 1998, according to data that Equifax Inc (EFX.N), one of the largest U.S. credit bureaus, provided exclusively to Reuters.”

To what score model she refers is unclear.  In the article, 850 is the highest score on the scale, but there is no mention of the lowest.  So, to the average person, the model might look like the broad-based risk FICO credit bureau score BEACON 5.0 available to consumers at myFICO and required by Fannie Mae and Freddie Mac.

Or, it could be something else.

That is because the consumer reporting agencies play a childish game with numbers, creating credit scores with scales similar to that of the well-known FICO score, 300-850.  TransUnion even makes one, called Transrisk, that has exactly the same scale as the FICO–300 to 850.  There’s PLUS at Experian (330-830).  And, in the case of the company that is subject of the fabulous exclusive Reuters story, there is the Equifax Risk Score 3.0 (280-850).

NBC TODAY: Employers use credit scores

The consumer reporting agencies all state that they do not provide credit scores for employment screening.

However, last month on NBC, “TODAY” host Matt Lauer introduced a segment with this line:  “This morning on TODAY’S MONEY, five ways to improve your credit score. It impacts all areas of your life from getting loans to how much you pay for insurance, even whether or not you might get a job.”

The interviewee, “TODAY” financial editor Jean Chatzky, does not disagree with Lauer’s statement.

Visit msnbc.com for breaking news, world news, and news about the economy

Earlier this year on ABC‘s “Good Morning America,” George Stephanopoulos said that your credit score is the key to getting a good job.  CBS did the dubious deed three years ago.

Paying judgments: Lew Sichelman, 2002 and 2010

With the Memorial Day weekend fast approaching, syndicated columnist Lew Sichelman took a shortcut.

Lew Sichelman, 2002: 

Beyond that, though, proceed cautiously. One thing you don’t want to do is pay off any judgments or collections that are at least 24 months old.

Not only is this “unlikely to get you where you want to go,” [mortgage broker Ginny] Ferguson warns, it could turn an old problem the scoring software views as insignificant into a new one the program sees as much more serious.

Why? Because scores are based on the last day of activity. So if you pay off a 5-year-old credit problem, it becomes a “yesterday event” that will have a much more profound — read that “negative” — impact on your score.

Lew Sichelman, 2010:

Beyond that, though, proceed cautiously. One thing you want to be careful about is paying off any judgments or collections that are at least 24 months old. Not only is this “unlikely to get you where you want to go,” Ferguson says, it could turn an old problem the scoring software views as insignificant into a new one the program sees as much more serious.

Since scores are based on the last day of activity, paying off a five-year-old credit problem could become a “yesterday event” that will have a much more profound — read that as “negative” — impact on your score.

2002:

In a misguided attempt to improve their credit scores, too many mortgage borrowers are taking steps that end up doing more harm than good.

2010: 

In a misguided attempt to improve their credit scores, too many mortgage borrowers are taking steps that end up doing more harm than good.

2002:

Among other blunders, they are paying off judgments when they don’t have to, closing out old accounts they shouldn’t and opening up new ones and unnecessarily consolidating their credit cards.

2010: 

Among other blunders, they are paying off judgments when they don’t have to, closing out old accounts and opening up new ones when they shouldn’t, and unnecessarily consolidating their credit cards.

Etc., etc.

 

From: Greg Fisher 
Sent: Friday, May 28, 2010 1:10 PM
To: Watts, Craig H
Subject: credit score, FICO, effect of paying judgment

 

See https://blog.creditscoring.com/?p=1257

 

Does paying a judgment decrease the FICO score?

AJC, and credit score and job applications paranoia irony

Right in Equifax’s hometown, in an interview piece on chairman and CEO Richard F. “Rick” Smith, a writer for the Atlanta Journal-Constitution asks, “Is there too much paranoia about credit scores, which can affect everything from loan and job applications to insurance premiums?”

Apparently, he missed the story about Equifax/employers/scores, so the irony of the notion of paranoia is painfully accentuated.

‘Dude’s on vacation.

Good Morning America says credit score key to job

Last week on ABC’s “Good Morning America,” host George Stephanopoulos introduced a segment by saying, “You know, your credit score is the key to getting a credit card, a mortgage– even a good job.”  The accompanying web page says, “Credit scores can affect many aspects of your life, your ability to get a credit card, a mortgage and even a job.”

The interviewee, Mellody Hobson (who ABC calls an expert and Guru), did not disagree.  Previously, Hobson said that the average credit score is 676 when the median FICO score was known to be 723 (click on “yuk it up“).

Meanwhile, the consumer reporting agencies all state that they do not provide credit scores (wacky video) for employment, an actual verifiable fact that ABC failed to report.

Laura Zaccaro, whose name appears as the co-author of the web page said that her sources include Tory Johnson and FICO.  In 2008 FICO referred to “anecdotal information gleaned from public sources such as published articles.”

Last month, the Federal Reserve told Congress that employers use credit scores.

Credit dude on hiring and credit scores, Des Moines Register

To:  Matt
From:  Greg Fisher, creditscoring.com
Date:  April 29, 2010
Subject:  credit score, employers, Des Moines Register

You said: “Know your credit score. Many employers today take your credit score into consideration when determining if you are the right person for the job.”  However, the consumer reporting agencies do not provide credit scores for employment screening.

You are at the top of the news searches this morning.  The story about people saying employers use credit scores is getting boring.  But, identifying who provided that information:  Now that’s interesting.

Who is your source regarding credit score use by employers?

mint.com and Experian – strange bedfellows

See if you can follow this.

The players

The Consumerist, a former property of notorious Gawker Media, is now owned by Consumers Union, publisher of Consumer Reports.  The move is nearly inexplicable, but, apparently, CU thinks that that is how to get young and hip.  But there is a firewall.  A new entity, Consumer Media LLC, houses The Consumerist.  The domain was registered by Consumers Union in December, 2008.  Requests for the home page of http://consumermediallc.org/ are redirected to consumerist.com.

Mint.com is owned by Intuit, the publisher of Quicken personal finance software.  Mint/Quicken is a Believer, saying, viral video-style:

These days, credit scores are not only used by lenders but by everyone from landlords to prospective employers.  A bad score can keep you from getting an apartment, a mobile phone or even a job. – Quicken, March 4, 2010

Now before you get sucked in by that bit about employers, see this video for another perspective.

Other minty-fresh advice includes: 

Make a large purchase using your credit card and pay it off immediately. This impressive payment behavior will earn you good marks. – Mint.com

The only guy likely to be impressed is the one you buy the big-screen TV from .  A history of a large balance is not part of the FICO score scheme.  And the only way to create a credit card history is to let a balance ride long enough to have a record.  Further, as everybody knows by now, high balances compared to limits kill.  But do enjoy your fabulous vacation.

Now, back to the story

Last week, the Consumerist gushed, “Mint.com has an exhaustive article about perfecting your credit to achieve the highest possible ‘elite’ score: anything over 800.”

Exhaustive?  Hardly.  More like exhausting.

According to Mint, the article (“Can You Increase Your Credit Score to 850”) is provided by Experian.com.

Experian.com in that sentence actually links to the disgraced FreeCreditReport.com owned by Experian. The national consumer reporting agency’s Web site was even parodied by its own regulator, the Federal Trade Commission. In the ultimate irony, the FreeCreditReport.com’s home page has to ask the question a consumer might wonder about a site with such a name: “Why isn’t my Credit Report free?” Oft-quoted credit report expert John Ulzheimer calls a recent FTC action the Experian Rule.

Mint.com addresses the concerns of its members:

We link to services provided by two of the largest credit bureaus (FreeCreditReport.com by Experian and TrueCredit by TransUnion) because banks and financial institutions check your credit profile with these bureaus. The services give you access to your credit score, credit report, and credit monitoring alerts.

Fake-O FICO Funk

However, the credit score at Experians’s FreeCreditReport.com is not sold to lenders. That score, the PLUS, is a Fake-O (a term acquired by a member of Congress in a hearing  last month).

Lots of people in social media dig the 850 score Mint article.  In its first paragraph, it mentions a consumer who thinks he is “a financial unicorn,” and explains that only 5.7% of Americans achieve an 800 (according to Credit Karma). The next paragraph refers to the consumer’s FICO score. However, FICO states that roughly one in 8 have a score of 800 or more.  Further, myFICO.com illustrates the 800 club with the figure 13%, not 5.7.

And then, there’s this in the Mint piece:  “Since debt utilization makes up 30 percent of your credit score – the second biggest factor after timely payments – carrying a balance can keep you out of the credit-elite category.”

So, here’s the big question:  If debt utilization is 30%, then what percentage is “Number of accounts with balances“?  And, what percentage is the “Lack of a specific type of balance, in some cases”?

Finally, Mint.com suggests, “In general, the rules to join the credit elite are simple: make timely payments, keep your credit utilization up to about 25 to 35 percent of your available credit, and minimize credit inquiries.”  But, FICO disagrees. Su–ze — Or–man, whose face you can see– right– on– myFICO.com, writes, “The FICO brain trust says there is no specific number that qualifies as a ‘good’ ratio, just that lower is always better.” And, FICO spokesman Barry Paperno said, flat out, “The lower that utilization number is, the better it is for your score.” The scrap heap of comments in that regard just got a little bigger.

Impossible

But, by far, the worst thing about the Mint credit score article is that its “provider,” Experian, can’t even come to an arrangement with FICO to allow consumers to see their FICO score like the other two national consumer reporting agencies.  And the scale of the PLUS score, the score to which the article links through FreeCreditReport.com, ends at 830, not 850 as in the title. In other words, you could do everything right– make all your payments on time, pay down your credit cards, have the optimum number of accounts– and pay the admission to check your score regularly and religiously for years.  But you would never get to 850 because that number doesn’t exist in the PLUS score range.

If the notion behind Consumers Union is buyer beware, reader beware of Consumers Union.  One thing is for sure:  Whenever Experian or Consumers Union is involved, nonsense is sure to follow.

credit score, employers, Center for Responsible Lending

From: Greg Fisher 
Sent: Tuesday, March 30, 2010 10:51 AM
To: julia.gordon@responsiblending.org
cc: drshow@wamu.org
Subject: credit score, employers, Center for Responsible Lending

In response to Diane Rehm’s question about credit score use in pre-employment screening, you did not disagree with the premise:  Employers use credit scores.

What evidence suggests that employers use credit scores?

What is the name of an employer who uses credit scores?

(:47:07)

DIANE REHM:  We have heard from various callers and e-mailers that if you walk away from your home– if your credit score is bad-bad-bad– that your next potential employer may look at that score– may look at that record– and that that record could be held against you.  Julia?

JULIA GORDON:  More and more employers are doing credit checks before they hire somebody.  So, ruining your credit score can have all sorts of anticipated and unanticipated consequences, which is why, again, I would really encourage people:  If your credit is good, and you have the opportunity not to become delinquent on a loan, please don’t.