Category: Government

Employers credit score Catch-22 myth, Tribune Co. IV

[previous post]

It has been a contentious and rocky road, but Maryland media may finally be getting it (it’s a start, anyway) right.

After publishing

[Vangel Paper co-owner Valerie S.] Androutsopoulos said she doesn’t have blanket rules about using the reports and tends to ignore bad credit scores if they involve medical or education debts or mortgage issues,

the Baltimore Sun (“Light for All”) publshed a follow-up: 

Employers already are barred from seeing a person’s credit score, but the Assembly wants to limit their ability to access the entire report.

Regarding the first piece, the paper’s politics and government editor wrote:

Mr. Fisher:

Thank you for calling this issue to our attention. We have run a correction in our print and online editions.

However, the correction does not appear on the paper’s errors and corrections (named “Corrections and Clarifications”) web page.  Further, other items from the same fold are still wrong. 

It does not stop with media.

Employers credit score Catch-22 myth, Washington Post Company

From: Greg Fisher
Sent: Friday, March 25, 2011
To: Allan Lichtman, professor, Department of History, American University
Cc: Meredith Hooker, managing editor for Internet, The Gazette; Ken Weiss, editor, Gazette of Politics and Business (weekend edition); Jeff Allanach, editor, Frederick County newsroom, The Gazette; David B. Simon, managing editor, Montgomery County newsroom, The Gazette; Vanessa Harrington, editor, Prince George’s County newsroom, The Gazette; The Washington Post Company
Subject: credit score, employers, The Gazette, The Washington Post Company, 2011-03-25

You wrote, “The American people are well aware of the problem of using credit scores for employment decisions.”

Who is your source regarding credit score use by employers?

See this message and your reply at https://blog.creditscoring.com/?cat=myth-2.

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

credit score, employers, undersecretary, Office of Consumer Affairs and Business Regulation, Commonwealth of Massachusetts

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Tuesday, January 25, 2011 11:12 AM
To: Barbara Anthony, undersecretary, Office of Consumer Affairs and Business Regulation, Commonwealth of Massachusetts
Cc: Jason Lefferts, director of communications, Office of Consumer Affairs and Business Regulation, Commonwealth of Massachusetts
Subject: credit score, employers, undersecretary, Office of Consumer Affairs and Business Regulation, Commonwealth of Massachusetts

You wrote: “A credit score is a vital tool that goes beyond whether or not a bank or retailer will hand you a credit card. It affects your interest rate when applying for a mortgage or getting a car loan, and in some cases can be checked by a prospective employer.”

What indicates that employers use credit scores?

creditscoring.com vs. The Fed – The 2007 employers incident

The Federal Reserve continues to gain on creditscoring.com.  There is 2010 (twice), 2008, and here is a 2007 incident. 

In “Impatience and Credit Behavior: Evidence from a Field Experiment” Federal Reserve researchers state, “Additionally, credit scores can be used by potential employers and landlords in employment and tenancy decisions.” 

Federal Reserve Bank of Boston Working Paper No. 07-3 is published on the Fed’s website.

Referring to the paper, the Federal Reserve Bank of Boston publication “Research Review” states, “FICO scores, which reflect an individual’s creditworthiness and are widely used to determine loan interest rates, insurance rates, employment offers, and tenancy decisions, are associated with long-run discount factors.” 

The hifalutin research document also states, “For scored individuals, the mean FICO score was 623 (s.d 83), which is below the U.S. average of 67816. ”

However, in August 2007, Fair Isaac said, “The average FICO score is not 678.”

Footnote 16 refers to– you guessed it– Experian.

But, all may not be lost, truthseekers– there could be a revision.  Page 1 states, “This paper, which may be revised, is available on the web site of the Federal Reserve Bank of Boston at http://www.bos.frb.org/economic/wp/index.htm.”

ScoreInfo website launched by Fair Isaac

Fair Isaac introduced another website today:  ScoreInfo.  In a press release, Jordan Graham, president of FICO Consumer Services said, “FICO launched ScoreInfo.org to help consumers better understand their disclosure notices and how to use that new knowledge to their benefit.”

On January 1, 2011, federal Fair Credit Reporting Act risk-based pricing notice rules went into effect.  The Federal Trade Commission and the Federal Reserve Board issued joint press releases, but there is no link to the Fed’s version here because its chairman, Ben Bernanke, has still not responded to the question about its statement about employers using credit scores.

The website joins Fair Isaac’s other websites FICO.com and myFICO.

The enigmatic realm of credit scores at CNBC

Following a question from creditscoring.com regarding a CNBC claim that “only .5 – 1 percent of consumers” have achieved an 850 credit score, CNBC amended a January 4th story on its website.  The error and its correction is not documented.

The original statement was, “MyFICO.com says that only .5 – 1 percent of consumers have achieved this golden number.

The corrected statement is, “MyFICO.com reports that only 13% percent[SIC] of consumers have achieved scores over 800.”

However, in July, (after questions from creditscoring.com about an Associated Press report) Fair Isaac, the company who owns myFICO, removed the distribution chart that included the 13 percent statistic, and said that it would replace it.  The credit score company, still, has not provided the replacement.

Despite that, in October, the U.S. Equal Employment Opportunity Commission heard remarks from the National Consumer Law Center regarding a conclusion cobbled together about the credit score national distribution.  The NCLC’s notion that one-quarter of consumers have a credit score under 600 was attributed to Fair Isaac, and the notion that those under 600 comprised only 15 percent before “the Great Recession” was attributed to the Associated Press. 

A FICO spokesman said that the AP used the 15 percent statistic “as a proxy for a pre-recession distribution curve.”

On April 13, introducing a segment titled “Credit Check: Career Killer?,” a CNBC anchor asked, “Does a credit score– especially a high one– indicate a better applicant?”

The consumer reporting agencies all claim that they do not provide credit scores for employment purposes.

FHA average FICO score surpasses 700

FHA (the Federal Housing Administration) reports, “For the first time the average FICO score for insured cases reached the 700 level — actually 702.”

But, somebody thinks that’s not necessarily such a great thing.  The U.S. Department of Housing and Urban Development (HUD (FHA is part of HUD)) has just opened investigations resulting from complaints filed by the National Community Reinvestment Coalition (NCRC).  NCRC states that its investigation “reveals that too many of the country’s largest financial institutions are refusing to lend under the FHA loan program to consumers with credit scores between 580 and 640, despite the fact that FHA policy establishes a 100% guarantee for refinance.”

However, lenders are judged by their default and claim rates, and their underwriting authority can be termintated if those rates are too high.

Also, see:  Average credit score chart, FHA loans.

Zillow and SF Chronicle believe Fed credit score info

Consumer reporting agencies TransUnion, Equifax and Experian all emphatically state that they do not provide credit scores for employment purposes.

Despite that, again, the Federal Reserve claims that credit scores are, indeed, used in employment.  Zillow and the San Francisco Chronicle believe it.

The first sentence of a Federal Reserve Bank of Cleveland commentary states, “Credit scores are used in nearly every part of our lives, from applications for car loans, mortgages, credit cards, and car insurance to even some hiring decisions.”


UK ICO – Credit

In the United Kingdom, the Information Commissioner’s Office (ICO) refers to credit bureaus as “credit reference agencies.”

The ICO is the UK’s independent authority “set up to uphold information rights in the public interest, promoting openness by public bodies and data privacy for individuals.”  The Information Commissioner enforces the UK’s Data Protection Act 1998 and Freedom of Information Act 2000.

The office provides a document for consumers titled “Credit explained.”

National Association of Realtors – NAR credit policy

The NATIONAL ASSOCIATION OF REALTORS actually has a written credit policy; it is named “NAR Credit Policy.”

The sub-title is, “LENDERS, FHA, THE GSEs, AND FEDERAL REGULATORS SHOULD REASSESS AND AMEND THEIR CREDIT POLICIES SO MORE QUALIFIED BORROWERS ARE APPROVED FOR MORTGAGES”

The policy states:  “NAR questions the assumption that borrowers who agree to a loan modification or a payment plan for credit obligations they can no longer afford but who then demonstrate their ability to handle the modified payments are higher credit risks. NAR urges FICO to study the credit risk performance of these consumers and modify the FICO formula accordingly.”