One aspect of using credit scores for employment is that its monumentally discriminatory against people from lower income backgrounds. My (now-) wife and I ran out of money at the end of the semester during law school a number of times. A quick bailout from the bank of daddy was all it took to fix the problem without hurting our credit. People whose parents have money generally don't ruin their credit while young. People who don't can get in a lot of trouble with exactly the same level of responsibility.
Lenders don't want poor people to have low credit scores per se - they want people who won't pay back their loans to have low credit scores (I know it's sort of obvious, but I know this for a fact because I've worked with/around credit score modeling). The lack of money and the inability to pay back loans just happen to correlate very strongly so poor people are more likely to have lower scores.
In your case the credit score worked as intended because the "bank of daddy" will also likely be there in the future. You may have an unfair advantage, but that advantage is you were born with money; the fact that your credit score is higher is just a direct result of this.
edit: I should make it clear that I'm not talking about using credit scores for employment, which I think is absolutely discriminatory and misguided from the employer's perspective.
So it makes me wonder if he paid income taxes on that money. My guess would be no. I would guess the situation is similar for all those born with money. This makes this advantage doubly unfair.
For landlords and banks that's clearly a feature, not a bug. A person with a "safety net" is a lower default risk.
For employers the situation is more complicated, and legal considerations rule the day. Companies can and do get sued for discriminating against individuals who exhibit low-class behaviors or appearances. Credit scores are a clean, legal, objective way of weeding out a lot of the same people.
Also, if an employee with a troubled history (especially a criminal record) messes up in a way that results in litigation, the employer can face accusations of negligence for putting him in a position where he can do harm. Proper screening helps the employer make a case that all necessary due diligence was performed.
> For landlords and banks that's clearly a feature, not a bug. A person with a "safety net" is a lower default risk.
I remember reading sometime ago that credit card companies would often actually offer better terms and larger credit limits to people receiving benefits (welfare) than those who were employed when the total amount of income was the same.
An unemployed person losing their benefit was judged to be a lower risk than an employed person losing their job.
This is an offensive lie justifying reprehensible behavior. Don't ever say it again please.
The criminal record part is true and reasonable, but when it comes to credit history, what you say has no basis with the exception of very narrow job titles where it is directly applicable. There has never been a case where an employer faced any legal action because they hired someone with bad credit for a job that did not have fiduciary duty.
Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do, outside of a very few roles and an even smaller set of companies (trading exchanges, for instance) with genuine and easily documented concerns about embezzlement or susceptibility to bribery? My point being: no, I don't think anyone here thinks widespread credit report pulling is reasonable.
Was anyone on HN unaware of the fact that some companies do request authorization to pull credit reports during the hiring process? I'd be surprised, but maybe there are.
Obviously, my subtext is: what is this post doing on HN?
Even if we all agree the practice is malodorous, without public discussion of it, we are apt as individuals to concede to it as we believe we have no alternatives.
It's similar to the puzzle interviews which are controversial and many people here dislike. By talking about it, by raising it and discussing again and again their negatives, it helps raise awareness of strategies on how to avoid them, what to do when one is encountered, and can even raise awareness in people that do like them as to why they are problematic and encourage them to find alternatives within their company.
FWIW, I think credit pulls are obnoxious, and even so, yes, I have been asked to consent to them as well as background checks for jobs which should not need them at any time.
This is on HN because it gratifies one's intellectual curiosity [1]. Moreover, it's an important public policy topic that affects a large number of people in the US and beyond.
That said, I believe employers are well within their rights to run credit checks on their employees. Granted, it might not be useful, but nobody's forcing anyone to apply to a job, either.
If you are on welfare, the government is forcing you to apply for a job. That was the result of the 90s "welfare reform."
Edit: also, I don't think HN's top commentor needs to have someone give him a link to the guidelines. That being said, I agree with you that this is relevant.
> Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do
I would if the evidence suggested that a credit report was a good indicator of the risk of the candidate committing an offence, and that the candidate is applying for a position where they have the ability to do such.
I suspect that the probability of either event is small, and that it's worthless and discriminatory. My major concern is that the practice turns into a catch-22--you need a job to get out of debt, but you can't get a job with debt.
I worked at a major financial institution where a pre-requisite was drug, credit, and background testing (even running fingerprints) for everyone. The whole thing seemed a big waste of time.
> Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do
That's not the pertinent question. Since it's already happening, the trend can only be reversed through confrontation, and confrontation only happens if people think that pulling credit reports is an unreasonable thing to do (as opposed to not having an opinion on the practice). Otherwise people are inclined to say nothing if it so happens that they have the ear of someone responsible for making the decision (or are such a person).
The default position propagates the bad practice, making it vitally important to force people to choose one side or the other before they unwittingly endorse the status quo.
outside of a very few roles and an even smaller set of companies (trading exchanges, for instance) with genuine and easily documented concerns about embezzlement or susceptibility to bribery?
Ok, I'll be that guy. The risk is that an employee with bad credit might be more likely to steal or take bribes, and you acknowledge that this is a potential risk for some employees (e.g., comptroller of NASDAQ).
Why do you believe it is a risk that the comptroller of NASDAQ might embezzle, but not a risk that a guy selling $2,000 shoes might swipe a few $100 bills from the register?
> Why do you believe it is a risk that the comptroller of NASDAQ might embezzle, but not a risk that a guy selling $2,000 shoes might swipe a few $100 bills from the register?
Let's take a practical example here. I've had my credit run when consulting for certain clients (software security). If I were a malicious actor and, say, intentionally left vulnerabilities out of a report to use them for my own, it may never be detected. The likelihood of someone discovering that you are stealing from the register is much, much higher.
Now, do I think that a credit score correlates to these activities in the least? No. But I can certainly see why they'd do it for people with access to critical systems and not your average joe working at a shoe store.
I hope you know that by allowing clients to run your credit, you're doing a major disservice to everyone else in the industry and you're part of the problem.
The thought that bad credit has anything whatsoever to do with sitting on vulnerabilities is offensive and ridiculous. Use a criminal background check to find criminal behavior. A person with bad credit doesn't have a criminal record. Don't act like they do, and don't help others act like they do.
Half the people I've met in this industry have poor money management. Don't hire them to be accountants. It has absolutely no bearing on their ability to do their job and speaks nothing to their integrity.
In fact, I can name more than a few examples to suggest bad credit negatively correlates with hire-worthiness. They're so wrapped up in hacking that their bills and often their health (leading to more bills) get neglected. Money management is a different skill. And it is a skill, not a measure of integrity.
I wonder how effective background check + credit check is versus background check on its own. Finding a known felon is easy enough, but discovering that someone may become a felon? That's tough.
It could be that the under- and unemployed are heavily overrepresented in online forums. It's one of the few places where they can be treated as equals. And also, given the nature of the site, many people here are taking risky financial moves that involve non-traditional employment and the hope of future rewards; and knowing that your plan B could be completely screwed up by something that happens to you because plan A goes up in smoke in a disastrous fashion ( say your business gets sued by a patent troll or you lose customer data to carders because your contract programmer had a severe lack of clue ); that's likely to be a concern.
You likely have exposure to several consulting companies other than just your own (via NCC if nothing else), but how is this usually dealt with in the security consulting industry?
I have had a few clients request my credit reports to do assessments. Do consulting companies typically bend over for those? I declined, but it was pretty clear that most or all consultants they talked to in the past agreed to it, and I was the exception.
For what it's worth, this client had nothing to do with finance or national security, and there would be no PII involved. Amusingly, the largest of clients I've worked with and the most sensitive information and IP I've handled never involved anything beyond an NDA.
We try to keep consultants from signing anything at all; that's why we have a legal department. But there are some clients that require explicit background checks, and we case-by-case them.
I'm not aware of anyone here authorizing a credit check. We have no idea what anyone's credit score here is.
I think NACLC is necessary but not sufficient for most important roles (either executive or operational; devops/ops, or developers in an environment without good dev/ops separation). In general any process which PFC Manning could pass is insufficient for personnel security screening, and any process which is one point in time vs. ongoing is also insufficient.
Maybe not for a shoe salesman, but for something technical, sure. Maybe not for some crappy social game, but for a platform, or anything touching finance, or anything security related (other than purely exploit development on public code).
Companies that deny people jobs based on factors that don't directly affect job performance (credit report, race, whatever) will have their lunch eaten by those who don't.
In other words, not hiring Mr. Carpenter represents a missed opportunity for those companies. If an experienced dress shoe salesman normally brings down $25 an hour, but Mr. Carpenter is desperate and willing to work for $20 an hour instead, the company that doesn't care about his credit and hires him anyway can save $5 on their hourly labor costs.
In fact, as long as Mr. Cooper is underbidding, it doesn't matter how much he underbids; hiring him is still a win-win situation if he asks for $24.75 an hour.
Why does this problem need regulatory solutions when plain old capitalism will do?
On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world?
Because people/companies aren't the rational actors tradition economics makes them out to be. Case in point: low credit scores are uncorrelated or even positively correlated with good job performance (cf. the featured article's citations). Yet regardless, companies still base hiring decisions off of them (in the wrong direction, the data suggests). Mr Carpenter had to go through undue hardship due to ignorance and stereotyping of poor people. In summary, I hope Adam Smith's invisible hand slaps some sense into these companies.
>On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world?
I think what you're seeing is the effect of credit monitoring agencies marketing departments.
Sure over the long term those companies that discriminate based on credit may lose out, but in the short term HR managers are going on the word of Equifax/Transunion/Experian that checking new hire's credit history is beneficial.
The history of business is full of stupid trends that aren't supported by the evidence.
The "invisible hand" often works very slowly.
By which time Mr Carpenter has been out of work for 3 years and is no longer the hot property he once was.
If a potential employer decides not to hire you based on a credit report, they are required to notify you of that fact and the fact that you have a right to get a copy of your credit report.
This sounds like a juicy area to start suing employers that don't follow the law.
See if they pulled the report. They could go through an intermediary, but you could make that unlawful (the current credit agencies are one step just above "hearsay" anyway) and aggressively enforce it.
It's very gray. I was just talking to a friend who works on Capital One's funds availability policies, and with complicated multi-factor models, it's difficult to discern whether the credit report was really the factor that led to adverse action.
There was some discussion of this in Professor Abu-Mostafa's "Learning from Data" class at Caltech. You can use machine learning techniques to build systems that are very good at saying whether or not you should give someone credit. If your system say no, though, you have to tell the applicant why credit was denied.
The banks are pretty sure that they can't get away with just saying "well, this big black box that we got some Caltech professor to build for us looked at all our prior customers and decided you are too similar to the bad ones". They need to say something specific.
I wonder if one could approach this by fiddling the inputs and rerunning the check, trying to find a reasonable minimal tweak that would produce approval. Then report those tweaked parameters as being the reason for credit denial. For example, if you deny a car loan, run the check again with higher income, and if you find that this gets an approval, report that the loan was denied because their income was too low.
I asked about this on the class forums, and Abu-Mostafa said it was interesting, but he didn't know if it would satisfy the legal requirements.
There are (simpler) models you can use that allow you to explain how the system makes decisions. Namely, the naive Bayes classifier makes it extremely clear how much each component of the input vector affected the classifier output.
Why don't you just NOT check the "Allow them to check my credit" box? Your financial well-being is nobody else's business - except perhaps your spouse, your accountant and your potential creditors.
They're less likely to waste their time getting almost all the way through the interview process only to fall at the finish line. Better to spend your time elsewhere. Besides - there's many legitimate reasons not to want people checking your credit... every credit check is a hit against your credit score and thus may negatively impact future ability to get credit for things like auto loans and mortgages.
...and it still seems to me that the easiest way to get hired for a job is to work hard to be the best at whatever it is you do. Then when someone thinks "Oh, we need someone to do X job, everyone says 'This is the guy you need'," instead of having to go in through the front door like the rest of the unknowns. Your reputation should already have walked in the door long before you even know there's a job there for you. At that point, nobody looks at or cares about your credit.
That works for the kind of people who frequent HN. With lower-end jobs, there may not be a large enough difference between average and best to matter. Most of the people interviewed for the articles were seeking relatively unskilled positions.
Most job-offers I've seen in the software industry require authorizing a background and credit check to take the job. But that was in the neofeudal USA.
We've (very recently... in my lifetime) created a society in the US where it can be almost impossible to distance yourself from early mistakes. Or in the case of the guy here, something that isn't even a mistake you made really but a failing of our horrendous health care situation.
While there are sometimes systems in place to deal with this (eg. the 7 year window after which most things fall off credit reports), there's a nasty feedback loop that can't really be accounted for with statutes of limitations. "Ok, you don't have a $40,000 charged off medical bill due anymore, but why weren't you working for the past 7 years?"
It isn't just with credit either, I commented on something semi-related about a month ago here: https://news.ycombinator.com/item?id=5433720. While there are positive aspects to this permanence in some cases, there's a lot of negative too.
I think we're experiencing the worst of this now. As more data gets aggregated, it becomes easier to find something bad about everyone.
Maybe, in our mutually tarnished futures, the collective conscience of employers will see the absurdity of holding something against someone from 10+ years ago.
The main moral debate going on with regard to employment is what it's OK to have happen to someone who's unlucky, and how much regulation we're willing to put in place to protect those who are unlucky.
Most people who have bad credit were unlucky. They had unexpected losses of income or medical problems that their insurers wouldn't cover. However, most people would agree that it's OK for someone to be denied a house loan or credit card because of bad luck in the past. Loans aren't rights. They aren't necessities for living. If you can't get a mortgage, rent. It sucks to have your housing choices thus limited, but it's not exactly a life-wrecking catastrophe.
Jobs are different. Society has agreed, repeatedly, that bad luck shouldn't make a person unemployable; that everyone has the right to seek appropriate work. We make black-listing illegal and non-compete agreements non-enforceable (if they preclude employment outright as opposed to actual bad-faith competition) for that reason.
The problem is that there are a lot of companies that don't want to play by these rules. They really want to be like the comic-strip boss who throws two-thirds of the resumes in the trash and says, "I don't want to work with unlucky people".
What I think people should do, personally, if they meet onerous follow-on request is to fake time pressure (or use real time pressure if it exists). "I have a Friday deadline on an offer, and won't be able to turn it down unless I have an offer letter from you."
If the offer letter says, "contingent on <X>" where X is something onerous (like a credit check for a non-finance job) then you may want to ask what you get if you don't get the offer, negotiate until it's acceptable (again with the time pressure) and get that in writing.
FICO is crap. All it does is indicate how well you borrow and pay it back. Your credit score should not be a measure of how well you "do what you say you are going to do" -- which is what it has become. The guy in this article is case-and-point--he had a run of bad luck.
There are better ways to measure one's reliability and maybe someone here can disrupt the transunion-equifax-experian trifecta or create a new business out of measuring candidate quality for all kinds of things (rentals, jobs, etc.) that doesn't rely on debt. Even the person who is self-made / cash-only has to contend with this buffoonery.
Agree 100%. There's a more general notion of conscientiousness [1] that, without evidence, seems the really deep, meaningful thing we should measure. Credit score is crappy because cash-only people won't have it and it's effectively monopolized by three data providers with who-knows-what for commercial/financial incentives.
In the UK, I didn't see another company than Experian doing credit reports.
To know your credit report, you have to subscribe to a 30-days-free-then-£14.99-per-month thing. And they ask you for tons of info that they can use to improve their file on you. Every time that a business asks a credit report on you it lowers your score for a while. I'm sure the businesses are also paying to get access to your credit report as well.
Businesses don't use IQ tests in general because the tests have a racial bias.
Considering that income and debt to income ratio are racially skewed as well, wouldn't credit reports display the same bias, and require that companies prove that there is a legitimate business case in order to use them?
It's unethical (and stupid) to use IQ tests for hiring decisions because they have very little predictive power with respect to job performance. If a measure has such predictive power, it's not necessarily unethical to use it just because it also correlates with race.
I don't actually know whether bad credit is predictive for job performance, though the story for why it might be is easy to imagine.
The story for why an IQ test would correlate with good job performance is also easy to imagine, but it doesn't appear to match reality. I never see studies finding a correlation between credit scores to job performance when I read about this issue, which makes it puzzling that employers continue to use them.
Could it be that the people making the decisions here are making them based on the credit reporting agencies' marketing rather than concrete data?
I was commenting on a problem with the argument that they shouldn't be used because they may have a racial bias. I don't really have a position on whether credit reports are a useful tool in hiring decisions.
A lot of the reason to run a credit check as part of NACLC is to get a list of addresses and thus to help with the national/local agency checks part of the process.
I'd find it hard to care if someone had a $50k medical debt and bankruptcy, particularly if disclosed before it was required, but knowing someone lived in Florida and had outstanding Florida warrants for check kiting and identity theft (sigh; I had this happen!) would be useful, and derived from the credit report.
I actually had to pay off some 6 year old disputed $20 collection agency stuff right before I did NACLC myself, just to make it cleaner.
I don't endorse doing credit checks on candidates, and it's certainly not something I would ever do myself, but I can testify to the fact that employees with financial problems can be an incredible drain on the company and can have a major negative influence.
I do however live in a country with strong social security and healthcare, so financial problems are relatively more often the result of personal issues rather than just bad luck.
How were they drains on the company?
Was it just correlation between financial problems and people who were a "drain" or where they continually asking for extra pay or stealing things to pay back debts?
"I can testify to the fact that employees with financial problems can be an incredible drain on the company"
Most people have problems at some point in their lives that impact their ability to concentrate on their work. An employee could be going through a divorce or other relationship break-up, or have health problems or have family members with health problems. Are employers going to try to dig up this kind of information about potential employees as well? Where does society draw the line?
For that matter, I imagine that many employees who have financial problems would make an extra effort to succeed at work, since they really need the income.
I've been told that having no debt at all is like having a bad credit score in the US, and a bad credit score is a big problem for a lot of stuff like renting a house, is it true?
I'm thinking about emigrating there, so it might be a big issue.
No current debt could be you having a credit card, using it to buy groceries, and paying the balance off every month. Your credit score will be fine.
No credit history could be you never having a record of having a credit card, because your activity in your country of origin isn't tracked in the United States. (When I moved here, that was still a blessing, but I digress...)
(Good) credit history happens from a repeated pattern of meeting one's financial obligations, including mortgage payments, utility bills, student loans, car payments, etc., and not doing financially reckless things like overdrawing bank accounts, skipping town, etc.
Generally one needs to have owed money to have a credit history, but this isn't the same as not having debt.
but isn't the fact of having never borrowed money, and have always saved before buying stuff even safer than taking any obligation whatsoever?
also, paying your phone bill on time gives you a good credit rating?
>> paying your phone bill on time gives you a good credit rating
I don't know about phone bills, but electric and gas bills, yes. Also, so does being signed to a lease and paying rent. And as stated above, just having a credit card, even if you only charge like $20/month and pay it off every month will help tremendously.
Neither of those are true actually. Phone companies check your credit, but they don't report back, unless it's negative information due to collections. Neither does paying rent.
You only get positive information on your credit report for loans, credit cards, lines of credit.
An empty history is a blank piece of paper, whereas one with negative records is stained for years. When you have no credit history, lenders can't form an opinion on you. However, you can build a history with only positive records by buying ever increasingly expensive stuff; for immigrants, a progression like car+apartment lease + furniture -> big TV/thing -> car -> house is common. (I never got up to the house part, but as soon as I had a credit card, I made sure I paid EVERYTHING with it)
This mindset is slightly frightening to tell the truth. 33 years without debt, and having to give money to the bank because people are suspicious of purely basic financial responsibility.
I mean, taking a job is not borrowing money, you're paid after the period of work, you're the creditor, the rent is paid in advance, you're still the creditor.
Does having savings counts positively in the credit rating?
Does anyone know if this is a common factor in hiring programmers? I would expect not given the job market, but I havent applied for a job in a few years.
