Newest Job Qualification — A Good Credit History

Alien54 writes quotes an article from The Day that says "In the past, only banks and financial service companies routinely ran credit checks on potential employees. But employers in other sectors increasingly are including [credit checks] in the screening process to assess applicants' honesty and integrity, traits not readily gleaned from a résumé. US employers' use of credit checks increased 55 percent over the last five years, according to Spherion, a recruitment and staffing firm with offices around the country.... "The credit check has become a general measure of responsibility and organization," said industrial psychologist Carl Greenberg, senior vice president of Spherion. "If you cannot organize your finances, how are you going to responsibly organize yourself for a company? Organization is a measure of responsibility."

Moo

[Chacham]

Major points:

Companies are relying on credit reports because employers, afraid of being slapped with libel suits, are no longer as candid about the performance of former workers.

but are looking for other information...the identity of a person...full legal name...A lot of people change their names if they have something to hide, and it lists former employers who might not be named on the résumé.

Insurance companies have been criticized in recent years for using credit information to set individual homeowners insurance rates.

35 percent of US employers were checking credit reports in 2004, up from 19 percent in 1996.

The Massachusetts Public Interest Research Group supports legislation that would freeze consumers' credit reports, making it unavailable to a range of people and organizations. A similar measure, introduced after ChoicePoint Inc., a personal and financial data collection firm, reported that it had mistakenly sold the financial information of more than 145,000 to a group of criminals, died in committee this year.

Re:Little Suzy.

[FatAlb3rt]

Employers often are looking for the following things - collections, bankruptcies, foreclosures, and accounts not in good standing (24-month payment history, accounts being paid late, etc). Getting the credit score may be helpful, but it doesn't tell the entire story. And a credit report with the credit score costs more than a standalone credit report. An applicant with lines of credit is also indicative of someone who wants/needs job stability.

Re:Illegal credit checks

[ipfwadm]

Illegal?

Did you not read the piece of the article I quoted? It said federal law requires applicants to be notified before a check is run. In other words, if I am not informed that it was done, then yes, it's illegal.

My company often runs a credit check on possible customers, which is a sane thing to do. I hope you agree on that one. Doing it on a possible employee seems like a even more sane thing to do.

This is a total non-sequitur. The reason for a credit check is to determine the likelihood of being paid back by a customer who you are going to extend credit to, based on that person's past experience of paying others back. Thus it makes perfect sense to check the credit of a customer if you're in that business. But checking potential employees? Unless the job involves paying bills out of my own pocket, then one has nothing to do with the other. Please tell me how my ability to pay back creditors reflects my ability as a software engineer. As others have pointed out, there are countless ways to have bad credit without having made poor decisions in your life.

Re:Little Suzy.

[GigsVT]

Credit card companies that already have accounts for you might like this, but it doesn't help you any.

If they see you carry a balance, and only pay minimums, they aren't going to offer you any good deals. If you suddenly pay off your cards, they will start sucking up to try to induce you to carry a balance again, giving you lower rates, better balance transfer deals, etc.

Also, it damages your credit score if you carry a large percentage of your available credit. Companies don't want to offer you credit if you already have 2 other maxed out cards, that's high risk.

So I'd say your advice is pretty universally bad, unless you aim is just to pay the most to the credit card companies.

Re:Little Suzy.

[LiquidAvatar]

My wife and I have just begun preparations to buy our first home (we should be ready in the next 4 or so years, when prices are expected to be at their lowest). Part of that research has involved learning about our credit scores and how to improve them (if you're going to go into debt for 30 years on $300k (we live in CA), every percentage point matters). We leared a few tricks about credit cards.

This is just a guideline, but we learned that having and using a credit card can be beneficial to your credit score, so long as you pay it off regularly. It can also be hazardous to your credit score, even if you pay it off regularly. If your total used credit is less than 1/3 of your maximum credit, apparently that helps your credit rating. Inversly, if your total used credit is greater than 1/2 of your maximum credit, that hurts your credit rating. So, if you can, raise the limits on your cards, and it may just help your credit rating rise.

Re:Little Suzy.

[shayne321]

Inversly, if your total used credit is greater than 1/2 of your maximum credit, that hurts your credit rating. So, if you can, raise the limits on your cards, and it may just help your credit rating rise.

While your advice is correct, there's another aspect to consider here.. Some companies I've run across (mainly mortgage companies) consider your credit limits as outstanding debt when figuring your debt to income ratio. The theory is that even if your debt today is 1/2 your limit, tomorrow you could max the card.. So for that reason they will add up your current debit using the limits of all of your unsecured cards, then calculate your debt to income ratio from there. I don't necessarily agree with it, but I wanted to point out that it does happen... Be very careful when asking companies to raise your limit just to get your balance under 50% of the limit - this could come around to bite you if you apply for a mortgage that is close to your debt-to-income ratio limit.

Re:Little Suzy.

[ergo98]

Question to thread: Please post information about these "trade secrets" and "magic". It would be interesting to see real, cited references.

You write that in what appears a sarcastic tone, implying doubt about my "statements". Yet these machinations of the credit industry are hardly hidden - a one-second google search yielded http://www.privacyrights.org/fs/fs6c-CreditScores. htm [privacyrights.org].

This yields nugglets such as-

The exact formula of the FICO and other scoring models is a trade secret

Points are given or taken away based on the amount of available credit used. Certainly, using the maximum amount on your credit card and paying only the minimum each month can lower your score. But, using a large percentage of your available credit each month, even when you pay the bills faithfully, can detract points if you are carrying a high balance at the time your credit history is scored.

...and so on.

Re:Little Suzy.

[bev_tech_rob]

Here's one.....about 9 years ago, I filed for bankruptcy...and about 6 months after the bankruptcy was discharged, I started getting credit card offers in the mail again (albeit with VERY high interest rates). I would promptly chuck them in the trash after ripping them up thinking it would help me to have as few credit cards as possible or none preferably. I was still paying on a house and that was about it. My wife and I went to buy a car a year ago, applied for credit, the dealer saw that I had been making on-time payments on my house and other bills, but due to the lack of credit cards CURRENTLY with a balance on my history, that dinged my credit score.... in other words, too many cards with a balance is bad, but also too FEW cards with a balance is bad as well.... I had read this article [msn.com] where even paying down some old debts can even HURT your score. Very screwed up credit scoring system we have...

Re:Little Suzy.

[letxa2000]

Don't know. I just bought my first house about 6 months ago. All I had on my credit report was two open credit card accounts (a car loan and other financial activity from a decade ago apparently had fallen off as being too old) with a total available credit balance of probably 40% of my annual income at the time, though one card was never used and the other never had more than $1500 on it and was paid in full each and every month. With that scenario, I pulled my credit score and it came back as 801 which they said was higher than 99.98% of the population, or something like that. When I was shopping for a mortgage, they basically all came back and just asked how much and how soon I wanted the money, that my credit history was perfect and I should just focus on finding the house I wanted.

My experience would lead me to suggest that people that want a good credit score should be most concerned about paying their bills on time, they should always try to pay more than the minimum, and they should try to pay off the debt as soon as they can (though, best I can tell from a credit report, you can't tell if the balance was paid off in full each month if you rack it up again the next month... it'll just show you constantly paying on time).

If you live a financially responsible life, your credit score is going to follow. I'd be hesitant to try any tricky efforts to game the system by just driving up your available credit or doing other things that supposedly help your credit score. The people that come up with the algorithm know the tricks people play and I'll bet they take that into account.

Determine how much credit you might need in a non-medical emergency, increase that by about 50%, and that's how much credit you ought to have. Use it just enough to keep the account active each month, pay on time, and be responsible. Your credit score will fall in line without having to try to trick it and possibly be penalized if you have bad information about this information that nobody really knows about, since it's secret.

Re:Don't throw code words at me

[BalanceOfJudgement]

But I'll ask anyway: how long does (student loan) hardship forebearance typically last?

By the way, answer to your question:

A total of 36 months over the life of the loan. You can take it in as many pieces for as long a period as you want, up to a total of 36 months (for example, 2 months here, 8 months there, whenever necessary to a maximum of 36 months total).

This was how the representative at the Direct Loans services explained it to me, anyway.

For someone who spends years out of a job, that can become quite a problem.

Check garnishing

[xombo]

This is more likely to do with the new bankruptcy laws. Now that the credit card companies can garnish your wages post-chapter-11 it's likely to become company policy across the board.

Legal Liabitlity Issues as well

[riversky]

There was a case in the mid 90's. I am trying to find it on the Westlaw server where a guy was stealing blank vendor checks from a business and the vender sued the business that employed the guy for failure to properly do a check that would show a guy who had massive debts. They won because the jury said he was more likely to steal than other applicants with better credit and therefore the business put people at risk for theft....Crazy but true.

Re:But that's Catch-22

[budgenator]

Pregnacy no longers forces kids out of high school, that hasn't happened for a couple of decades, sometimes it moves the student into an adult-ed sitsuation rather than traditional high school; and ADC, WIC and other programs pretty much take care of finacial problems encounters. You might be surprised at how many single high school moms have ended up going through college taxpayer paid and in a career field selected with prfessional help that not only well paid, but provides stable employement.

This must be stopped.

[under_clocker]

How to create a criminal:

Today on slash dot I read more and more companies are doing credit checks as a qualification to higher a candidate for a Job. I read that people have been turned down.
Because of issues such as student loans and what not.

How wrong is that? Let see. You take a person who has been the victims of identity theft or is just starting out in life and you put this kind of barrier in front of them and how far are they going to get? You have prevented that person from improving his or her situation you have effectively said to them "have to pay all your bills before we let you out " you are making them prisoners. You are rejecting their goal to get out of debt and you are in fact creating more debt as a result of your illogical decision to discriminate based on financial issues.

You (companies that support this kind of policy )and others like you wonder why there is crime? Why things are the way they are.
Well I say that putting ones credit on trial is a form of exclusion. A way to create a criminal. A person trying to get on top of his or her debt is being forced to take low paying jobs despite that they have the capacity for far greater things....Are those who disqualify people based on their credit not responsible in the least?

Who is the bigger criminal? Those who enforce this kind of policy or those who are the victim of this form of discrimination and commit crimes because they have no other recourse? Is it that we had to replace race sex and creed with yet a better way to segregate people. Credit....Which is bigotry my friends.

Example: Someone living in the ghetto that is poor might be able to rise up from their debt if you would give them a chance. Instead you choose to keep the poor where they are and only higher the middle class. And leave the poor in the ghetto. Women , blacks people and the poor are victims of this kind of policy and it puts any company that upholds this kind of policy in the ranks of similar organizations such as the KKK.

I for one have been the victim of this kind of bigotry. And I will advise any company that wants to check my credit history that this is not allowed by me. My personal finances are my concern and have nothing to do with my work habits.

If crime has increased. If there are more desperate people on the streets and if drugs and poverty are everywhere. Then stop and think about the contributing factors. One of theme is this 'credit check before higher procedure'. It is not the main reason but it is a majority reason. And is further proof that bigotry is not dead!!!.
  The majority of people who are poor are in debt. They are in debt because of employment availability to them... The ghetto is full of people who if given the chance to rise up and be somebody they would do great things. Yet this is a way of creating the 'haves and the have not's'. This is a way to pick though someone's personal issues and pry. To segregate and exclude. Everything that great men such as Martin Luther And John Lennon have fought for is being rejected here and we are seeing a trickle down theory in practice...Crumbs to the poor...Keep the poor where they belong beneath the rich....Amazing at how many Doctors out there have student loans they have not paid. Yet they seem immune to this kind of bigotry. Intolerance will be the end of us all.
        There are a great many wrong things in this country. We have to ask ourselves what is coming next...
What other doors does this open?
Think about it.

Re:But that's Catch-22

[canadian_right]

I can see a medical problem causing problems with credit in the USA as the USA lacks a national medical care program, but pretty much any other credit problem can be solved easily if the payments are on a physical thing. Sell the damn thing. This doesn't help much with student loans.

Lost your job, and car payments are suddenly too high? Sell the car. Too much on the old credit card? Stop spending. Sell some of the toys. You'll take a loss, but you'll have more money for important payments like your mortage or rent. If renting think about moving into a smaller place if a new job takes a while to find.

Anyone with any sort of equitiy in a home or a good job should NEVER keep a balance on their credit card. Get a line of credit and transfer the credit card balance to it if you can't pay it off. This should be a last resort, not a normal thing. Only spend what you can pay at the end of the month. If you really want something - SAVE up for it!

Simple rules for credit:

• Keep enough money in the bank to live on for three months.
• Only have one credit card.
• Always pay off the whole credit card when the bill is due.
• Save up enough to pay for luxuries before buying them.
• Put 10% of what you earn into long term saving and investments.
• Live within your means.
• At least once a year do a budget
  • Total income after taxes, per month
  • Bills you must pay (rent, food, clothes, transportaion, medical)
  • What is left after the bills:
    • Savings (amount you save every month)
    • Fun money
    • Saving for new luxury, trip, etc..
    • Retirement and other long term investments
  • Don't spend more than the "fun money" per month on fun!

  Running a household is simple. It only takes small amount of planning and self control.

A good site for information on this sort of thing

[Ph33r th3 g(O)at]

. . . is CreditBoards [creditboards.com], where credit scoring and other things related to credit and collections from the good guys' (i.e. not banks, credit reporting agencies, etc.) point of view are discussed. (I've no affiliation with the site except as a user.)

Re:Little Suzy.

[Cederic]

>> The minimum is the interest which is where the acutal profit is.

Hmm, no. At most the interest will cover the interest the card company pays, the overheads of running your account, the cost of acquiring you as a customer in the first place and maybe a teensy little bit of profit.

The real profit is the late payment fees, the foreign currency conversions, the cash advance fee, the credit card cheques..

Re:Little Suzy.

[Mr. Flibble]

Screw that. I can understand why they might want to look at a credit report to determine how responsible an applicant is, but I wouldn't do it as an applicant. Maybe if the credit bureaus start dishing out a "responsibility score" that just gives them a number based, basically, on absence of negative information without giving them the information.

That is called your FICO score, (Fair Issac COrporation). It is a number from 350 (absolute lowest) to 850 (absolute highest) that is a result of an algorithim applied to your credit history. Some organizations pull ONLY this score, and not your full credit report, that is, your credit history.

Re:An employer has NO right to do this, folks!

[misterhypno]

Age, race country of national origin or social class. Read the statute. Discrimination based on ANYTHING but the qualifications that pertain specifically to the job or issues regarding the safety of the other workers, or the individual him or herself amounts to illegal discrimination. Also, take a peek regarding the provacy laws regarding one's financial records. Those are VERY specific as well. The ONLY organizations that have a clearly and legally defined RIGHT to someone's financial history, which includes a credit record are lenders, litigants and institutions where the applicant would be handling large amounts of money and/or where issues of national security come into play. Otherwise, the employer has NO right to this information, though they may ASK for it on a voluntary basis.

Re:Little Suzy.

[kbielefe]

What you're asking amounts to how close you can get to the line of a bad credit rating without crossing it, which is a risky way to manage your finances. Keeping a good credit rating is as simple as living within your means and keeping your commitments:

• Keep only one credit card, one that has no annual fee and as low interest rate as possible.
• Never use it, unless everything below fails and what you are buying is an absolute necessity like food. Except if you are 18 and need to establish some credit, then you can allow yourself to charge whatever you know you can pay on the next bill.
• Buy everything except cars, homes, and educations with cash.
• Pay all your bills on time. If you can't, then move into a cheaper place, get rid of cable and cell phone, get a better job, or take the bus if you have to until your income exceeds your expenses.
• Put a little bit of money every paycheck into a rainy day savings account until you have enough for at least 3 months of expenses.
• Figure out how much you spend every year on "unexpected" expenses like clothing, home and car repairs, vacations, gifts, insurance, computers, etc. Put money in a savings account every paycheck to cover those expenses, so you earn interest on those expenses instead of paying interest on an "emergency" credit card charge. You know those expenses will come up eventually, so you're only fooling yourself if you treat them like an emergency. Not to mention that you tend to take more vacations when you don't have the guilt of going into debt to pay for them.
• Never believe what your loan officer claims you can afford. Figure out a monthly payment with some breathing room in case overtime gets cut, tell the loan officer what you can afford, and stick to it. Don't get a bigger house just because the mortgage company qualifies you for that amount.
• When your car is paid off, continue paying your car payment to your savings account. Chances are, you'll need to buy another car one day, and it will be difficult if you became accustomed to the "extra" money. Plus, a large down payment will dramatically lower your monthly payments. I currently pay about a third of what relatives pay for the same kind of car, and am working toward being able to buy a future car without any loan at all.
• Plan ahead for major expenses. There are better times of the year than others for purchasing a car or going on vacations, that can save a lot of money. For example, we saved a lot by visiting Washington D.C. in January, but felt a little foolish about our timing until we heard that friends were unable to get into places in the summer that had no lines at all when we went.
• Don't expect to have everything your parents have right away. Remember, they have at least 20 more years invested in their posessions than you do.

I know it sounds crazy to put money in savings when you are barely making ends meet, but when you add everything up over the long term, you are actually spending a lot less than you would if you were paying credit card interest, which means you can have more fun with your money. I was taking nice vacations twice a year, with no credit card debt, when people I knew with higher incomes than my intern's salary were having their houses foreclosed.

Re:Little Suzy.

[GigsVT]

a) 730 or 800 are both excellent. It's all gravy at that point.

b) Length of history matters more than anything else, assuming you don't have any negative stuff which will damage it heavily.

Re:Little Suzy.

[Dadoo]

Keep only one credit card... Never use it

Umm, wrong. I used to do everything you said, and the only reason I was able to buy my first house is because my wife had a better credit rating than me. Since then, I started paying for everything I can with my Amex card and paying it off, in full, every month. We just bought our second house a few months ago and my credit rating was a little better than hers.

The point is, having a credit card doesn't count, unless you use it.

Re:Little Suzy.

[EmuProphet]

Your landlord, phone, cable, electricity, gas, and etc. companies run what's called a 'soft' credit pull/check that does not damage your credit score. It is when you request a line of credit or an increase in your current line of credit that calls for a 'hard' credit pull/check. These hard credit checks are what damage your score not your rental applications, don't be ignorant!

Re:Little Suzy.

[ballwall]

Adding to that, you can find cards that give you up to 1% cash back or more like 2% in free airfare. If you have the discipline to pay them off every month, you can almost take a vacation a year just by paying with a different payment method. Trick is still the same: Don't spend more than you have. Oh, and watch annual fees, they'll negate the kickbacks most of the time.

now THIS is amusing

[batwingTM]

oh my lord, here we have the Senior Vice President of Spherion telling us about credit. let me tell you a little bit about Spherion and their financial management.

This happened in Australia, Spherion, the recruitment and training company from America purchased the training provider Interim, formally "Computer Power". it went well for a few years until Spherion starting "Streamlining" the company, closing campuses, and wondering why the student enrolments had fallen. so Spherion, in their wisdom, decided to sell the company, o.k. fair enough. So they prepared some finacial reports and showed them to potential buyers. then they "loaned" 1.1 million dollars from their former Australian based training, don't know why, I'm sure there is a reason though. so they sold this training group to "Easy Call" and it was renamed back to "Computer Power" and things were well again.

The company started to cut back their losses, although they were still there. in December 2005 Easy call decided that they had enough and ceased funding computer power. the staff turned up on the 3rd of January, after the chrismas break to be told that the company was in the hands of administrators and they no longer had jobs. now this has nothing to do with Spherion, obviously

So, as a staff member of "Computer Power" I got to attend the creditors meeting. Spherion never paid back that 1.1 million, and claimed that "Computer Power" OWED them about 1 million dollars. and Easy Call claimed that Spherion's finacial reports were in error, as they were not informed of the complete finacial condition of the company (which may well be posing for the court case that they were engaged in) however the 1.1 million dollar loan and 1 million dollar claim on the company are correct (according to my notes anyway, but the amount may have been as low as $900,000)

Obviously this account is tainted, but you know, Carl Greenberg may be right

manager
"hmmmmm so I see from your credit report that your ability to manage money may be in doubt"
applicant
"well, you see, I really needed a couple of thousand, so I put it on credit, and well, I needed that credit to offset this other credit I had arranged, so I had to cover that from this credit. but if you look at it my way it all makes sense"
manager
"It sure does, this is exactly the kind of fiscal incompetence we need more of in the corporate world"