Credit checks: A civil-rights issue?

MSN Money ^ | 02-05-2007

[MNJohnnie]

Are Credit Checks Racist?

Studies haven't found a link between poor credit and job performance, but more employers are checking, and minorities are getting squeezed. Insurers are slammed for checking, too.

By Christian Science Monitor

Lisa Bailey worked for five months at Harvard University as a temp entering donations into a database. When the university made the job a salaried position, Bailey, who is black, saw a chance to lift herself out of dead-end jobs.

Bailey's superiors encouraged her to apply, she says, but turned her down after discovering her bad credit history.

Bailey, with her lawyer, has lodged a complaint against Harvard charging racial discrimination. The reason: Studies indicate that minorities are more likely to have bad credit, but credit problems have not been shown to negatively affect job performance.

Some privacy and minority advocates are now seeing credit as a civil-rights issue as minorities start to fight employers and insurers who base decisions on credit histories. Their effort could slow the near doubling in credit checks by employers in the past decade, which affects millions of Americans who are struggling with debt.

"It's definitely a civil-rights issue because of the growing use of credit reports and credit scores for hiring, renting an apartment, insurance and the fact that people of color have not been integrated into the credit-scoring system as much as traditional white middle-class America," says Evan Hendricks, the author of "Credit Scores & Credit Reports: How the System Really Works, What You Can Do."

[clamper1797]

Hey ACLU credit checks are financial profiling get rid of Experian and all the credit agencies.

Better yet ... make the credit bureaus FINACIALLY responsible for errors in their reports. I have two errors on mine that I have been trying to get off for years. I even hired my good friends service and the bureaus are still dragging their feet. My friend explained that the bureaus get money for each negative item in a persons report. That is why they are loathe to remove stuff

[MrB]

Not based on race, it's based on the ability/willingness to pay on time

Yes, but anyone that wants to give you grief only has to show the "disparate impact" on "people of color" to "prove" you're a "racist".

[LIConFem]

"These people have obviously never had a long term health problem or a long term layoff."

And then there's the hypocricy of firms with horrible credit running credit checks on prospective employees.

That said, I have no particular problem with employers running credit checks, so long as they get permission from the prospective employee first. If said candidate declines, the employer is (or should be) free to make his decision based upon that.

[GeorgiaDawg32]

further, if you're out of work and send your resume to 10 companies, 5 contact you about possible opportunities and all 5 run credit checks, your score goes DOWN because of the inquiries..it's why I get a copy of my report every 3 months and if I apply somewhere, I refuse to let THEM run the check, instead I hand them a copy of the report (it keeps the inquiries to an absolute minimum, which is ZERO)...if they insist on doing one themselves, I tell them not to bother and will go elsewhere..if I can't find anyone to look at my printed report and make a decision, I don't buy..

[Ben Mugged]

Try getting, or keeping, a security clearance with bad credit.

[absolootezer0]

Credit checks for a job are BS in my opinion, but they are BS for everyone, not just the minorities. If you're going to buy something, credit checks make sense. Again, my opinion.

why? a company can't make sure that a person will be able to have a vehicle to get to work? that their 800 number isn't gonna be ringing with debt collectors calling in? so they don't have to worry that a person isn't going to have to take time from work to pay bills, or use company resources to pay them online or over the phone? won't have to worry that if they try to call an employee and find their phone is shut off? or that they'll oversleep if their power is turned off?

[domenad]

I told my current boss about my bad credit history before he hired me. His reply? "We like people with bad credit. They end up having to work a lot more."

[RobRoy]

I think it is reasonable to get a credit check on anyone that is supposed to pay you for something, over time.

I have a real problem with the concept of credit checks to get employment. As a contractor, I've been subjected to three in two years. It disgusts me. And the excuse is that they fear a person with "bad" credit is a security risk - except I hold the keys to no more secure data than pretty much anybody else here. It is really just a ruse.

But with the ramping up real estate crash, there are going to be so many highly qualified potential employees with "bad" credit that the companies will have to ignore the credit check except for the most dire cases.

[RobRoy]

>>These people have obviously never had a long term health problem or a long term layoff.<<

Or a divorce.

[jrestrepo]

Not as long as the shopping is done close to the same time. The credit score calculators changed it a few years back so if multiple mortgage companies submit for credit, it only shows up as a single instances as long as each is only a few days apart, all are within a range of time and all are mortgage companies. This I know to be fact. I spoke with guys at Experian about 3-4 years ago. Also, when I shop for a loan I will not give them my SS # until I am ready for a rate quote. I ask them for their best deal based upon what I tell them my credit score is and give them plenty of wiggle room so that they know I will not hold them to it if I am lying. I have never had a problem with this approach. I just bought a home two months ago. I did plenty of rate shopping and only had my credit pulled once.

Also, credit inquiries by mortgage companies are not as significant as inquiries by credit card companies and places like rooms to go. As an aside, the rooms to go are bad for your credit if you have more than 1 or 2 of active credit because the default rate is very high.

[clamper1797]

Not as long as the shopping is done close to the same time.

Absolutely untrue ... I just went thru it. I have 4 inquiries searching for a home loan. Not only did they appear, they dropped my score by 30 points

[showme_the_Glory]

"I owe my soul to the company stow" I have experienced that people with extreme debt are very conscientious and miss very little work as a result. On the other hand, people that are very secure are more likely to take an extra day off for whatever. Not scientific but generally true in my biz.

[Made In The USA]

To your point - I was laid off and out of work last year for about six months. If it wasn't for savings we would have been trashed. The irony is that our credit score actually increased during this period, yet we are now living on half the income and with zero savings.

However, to a certain extent, I agree that a credit report can yield a view to a person's sense of responsibility. In an extreme example, it is better to see indication of bankruptcy instead of numerous creditors suing and reposessions ocurring.

My perspective here is also from that of a former Credit Manager (NACM trained, 11 years of commercial, wholesale, and retail experience). My experience proved that credit evaluations are not an exact science and data obtained is occasionally incomplete or inaccurate in determining character, capacity, conditions, and capital.

[GeorgiaDawg32]

see my #18..

[Ben Mugged]

I have held a security clearance for over 40 years. The Government runs a credit check on me every 6 months. 15 Years ago, I was late on a couple of mortgage payments because my job had me in an isolated overseas location and I forgot to set up an automatic payment. When I returned, two investigators from DISA came to my office and asked me to explain the late payments.

I'm not complaining. My job requires me to have access to some very sensitive data and the people responsible for the safeguarding of that data must be very careful. Debt problems could indicate risky behavior that could pose a threat to that data.

[Zevonismymuse]

These people have obviously never had a long term health problem or a long term layoff.

My FICO is 720. I have never missed a house or car payment or had anything repo'd or foreclosed. I do have 15 negative items on my credit report resulting from a lengthy illness and dispute over a DX with my husband's doctor.

I will spare you the details but I really think it should be illegal to refer any medical debts to collections.

[Ouderkirk]

Studies indicate that minorities are more likely to have bad credit, but credit problems have not been shown to negatively affect job performance.

Persons with bad cradit are more likely to engage in illegal activities.

For insurance...persons with bad cradit are more likely to file fraudulent claims.

These are actuarial table proven but not PC.

[Made In The USA]

Or be burdened with the administrative cost of paying out garnishees.

There is a value to the credit information, if used properly.

[Spirochete]

I own a couple of rental units.

You're fully justified. Deadbeat tentants and those who break leases have bad credit.

But for homeowners and auto insurance policies? Show me the correlation between storm damage and credit rating, or collision damage and credit rating.

Employers are using credit checks as character checks, underwriters are using credit checks as a pretext to gouge low income people.

[jrestrepo]

I had an opportunity to speak face to face with guys from Experian and this is what they told me. All 4 inquiries will appear, it is just that all 4 are treated as one instance as long as they all show up as mortgage company inquiries and within a short period of time (unfortunately I do not remember how short is short). Also, since your credit dropped by 30 points for 4 inquiries, something does not seem quite right. From what I remember, an inquiry knocks the score by 10 points. So, the combination does not add up unless at least one merged (score wise) with another, or they dinged you for something else, or they were too far apart.

Since I will never let anyone pull me credit just to "verify" my credit score, I cannot say that I have ever had it pulled 4 times in a row.

Sorry.