Alleged use of credit scores by employers in pre-employment screening.
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.
Experian told John Ulzheimer what is not in employment reports. One of those things is “Credit score (read that again please….credit score is not included).”
However, the consumer reporting agency still maintains, “Credit scoring helps potential lenders, landlords, and employers quickly gauge an applicant’s credit history.”
Experian chairman John Peace got some of it right before his big announcement in July, but he has other things to do, now.
Recently, Experian (“the leading global information services company”*) announced that it and CreditCards.com “will co-host a live, interactive, online town-hall discussion of credit reporting and scoring.” CreditCards.com made the same announcement, replete with countdown clock to the exciting event.
Experian’s newfound public outreach/reach-out for goodwill follows the drubbing it took at the hands of Congress and the FTC regarding the FreeCreditReport.com debacle. Among other adventures, Chairman John Peace and Experian have traveled the the viral video route recently. There’s a fab, telegenic, “STYLISH, SMART, & SASSY” (click “HOSTING REEL” for a demo if you’re interested), newly-minted credit history expert and a bevy of B-list stars. It’s all packaged up with cutesy, sprightly and playful plucking strings to indicate when it is time to laugh (and you will need it), similar to scenes on Wisteria Lane and at Seattle Grace.
If you think that you can manage all that (and would want to), Experian is still looking for you.
CreditCards.com knows Enough to be Dangerous. They would have you believe that credit score factors include “employment, income” (FICO scores do not consider income and employment), and even “debt to income ratio.” And, speaking of experts and employment, the consumer reporting agencies do not provide credit scores for employment purposes. But today, while a battle rages in statehouses from coast-to-coast, one of the CreditCards.com’s “experts” wrote that employers use credit scores. It wouldn’t be the first time that that happened. And, they are in good company.
Take what these two tell you with a grain of salt. And if you participate in their forum, be sure to ask about your AWOL Experian FICO score, and what they are talking about with the line: “Credit scoring helps potential lenders, landlords, and employers quickly gauge an applicant’s credit history.”
*as opposed to Equifax, “A global leader in information solutions” (and, indeed, “Leading with Integrity“), or TransUnion, “a global leader in credit and information management.”
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.
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?
From: Greg Fisher
To: Sandra F. Braunstein, Federal Reserve
Subject: credit score, employers, Federal Reserve, 2010-03-24
cc: Michelle A. Smith, Federal Reserve; ConsumerHelp@FederalReserve.gov; Pierce Nelson, Sibyl Slade, Jean Tate, Federal Reserve, Atlanta; Federal Trade Commission Office of Public Affairs; Gerri Willis, CNN; realstories@cnnmoney.com; letters@smartmoney.com; Aleksandra Todorova, Stephanie Auwerter, SmartMoney; Elizabeth Warren; freshair@whyy.org; talkback@whyy.org; frontline@pbs.org; Gosia Wozniacka, The Oregonian; Jennifer Openshaw; PublicAffairs@dobi.state.nj.us; consumerfinance@dobi.state.nj.us; John Peace, Don Robert, Susan Henson, Susan Thomas, Media Relations, Corporate Responsibility, Experian; press.office@uk.experian.com; worldservice@bbc.co.uk; editor@mediaguardian.co.uk; haveyoursay@bbc.co.uk; gazette@independent.co.uk; online.editor@timesonline.co.uk; news@timesonline.co.uk; business@timesonline.co.uk; Barry Paperno, Craig Watts, FICO
Sent: 4/19/2010
See http://www.creditscoring.com/influence/government/federalreserve/employers2009atlanta.html and https://blog.creditscoring.com/?p=1154.
Last month, you stated to congress: “Credit scoring is widely used to evaluate applications for credit, identify prospective borrowers, and manage and price new and existing credit accounts. It is also used to facilitate decisionmaking in other areas including insurance, housing, and employment.”
However, consumer reporting agencies who compile and maintain files on consumers on a nationwide basis state that they do not use credit scores for employment purposes.
What evidence suggests that employers use credit scores?
How many employers use credit scores?
Do you have the identity of one employer who uses credit scores?
Greg Fisher
The Credit Scoring Site
greg@creditscoring.com
creditscoring.com
PO Box 342
Dayton, Ohio 45409-0342
937-681-3224
See if you can follow this.
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.
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.
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.
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.
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.
From: Greg Fisher
Sent: Monday, March 29, 2010 1:41 PM
To: Jessica Leveen Farr
Subject: credit score, employers, Kirwan Institute
Recently, you wrote, “Landlords may evaluate an individual’s credit prior to renting a home and some employers access credit scores for all new hires.”
Your footnote cites the document, “The Impacts of Foreclosures on Families and Communities: A Primer,” by G. Thomas Kingsley, Robin E. Smith, and David Price.
The only mention of credit scores in that document is in an endnote, referring to the document, “Credit Scores, Reports, and Getting Ahead in America,” by Matt Fellowes.
That document refers to a survey: “A 2004 survey of companies by the Society for Human Resource Management, for instance, found that 35 percent of companies used credit reports for this purpose, up from 19 percent in 1996.”
In April, regarding its 2004 “Reference and Background Checking Survey,” the SHRM replied, “Neither survey discusses credit scores, only credit checks.”
What indicates that employers use credit scores?
What is the name of an employer who uses credit scores?
Hi Greg,
Neither survey discusses credit scores, only credit checks.
[full correspondence with SHRM]
