Dealing with Employers Who Perform Credit Checks? 1418
Rick asks: "I recently accepted a Director level position at a small, 40 person, technology company. On my first day, I was provided with all of the standard employment paperwork such as the W2, NDA, healthcare, etc., as well as a document that is to provide my permission for the Company to do a comprehensive background check on me, including a credit history check. I am now in a stalemate position with my employer in regards to this background check document. I have refused to sign on the grounds that my personal credit information is of no business to the company and that they have no basis of need. The company argument (COO level so far, CEO is next) is that the company instituted this policy over a year ago for all existing employees and new hires, and to maintain consistency, every employee must comply. The company also maintains that the information allows them to identify potential problems with candidates or employees, in that people who cannot manage their own finances may not be good employees, or that those with troublesome credit may be more likely to steal from the company. The COO used less direct terms, but ultimately that was the argument. Have Slashdot readers successfully negotiated out of a mandatory employee credit check in the past? What arguments did you use?"
w00t (Score:3, Informative)
Google (Score:5, Informative)
http://toolkit.cch.com/text/P05_1585.asp
Yes - Negotiating this one is simple. (Score:5, Informative)
My statement was very straightforward: "I will not sign this on the grounds that you do not have the right nor privelege to require this information for the sake of employment. If you care to push this issue further, I will schedule a court date at the County courthouse and we will deal with it there."
The employer backed off, and I worked there for nearly two years. You would have REALLY shit if you saw the sort of privacy-invading NDA employment contract they tried to require of the programmers who were hired after me... Thankfully the first programmer through the door fought that NDA until it was toned down to a sane level (at maybe 10% its original potency).
NPR Story (Score:5, Informative)
Let 'em (Score:5, Informative)
At the very least, you should check your credit report to make sure it is accurate.
Re:You've got to be kidding me.... (Score:5, Informative)
Re:Google (Score:2, Informative)
</sarcasm>
Fairly standard practice (Score:2, Informative)
Re:You've got to be kidding me.... (Score:2, Informative)
Alternately, your company may supply you with a credit card for your travel (or other) expenses. That means they take the hit when you buy yourself a Lexus on their American Express card. I know a company that this happened to.
Security Cleanence Credit Checks (Score:4, Informative)
clearence back in 1978, I had to provide a lot
of information including bank and credit
information.
They explained to me that one of the things they
look at is the potential vulurability of the
person to being given financial help in return
for some favors (secrets) and then blackmailed
with exposure.
I also think they look carefully at all of
the information; credit history included; to
try to make certain that the person is not a
plant; that he or she did live a legitimate life
here in the United States.
Mark
Credit checks do NOT lower your credit score (Score:0, Informative)
Positives include paying off a large debt (on time), low debt/income ratio, and home ownership.
This is direct from my credit union loan officer.
Re:it will hurt your credit rating (Score:2, Informative)
"everytime someone looks up your credit who isn't you, it negatively impacts your credit rating"
Every time anyone including you makes a credit inquiry, it is marked on your record. This is called a 'footprint'. Lots of footprints on your credit history in a short space of time = you are a bad credit risk. This can be offset to a large extent, if you make damn sure that the footprint is marked as "Inquiry Only" rather than a full-blown "Application" (for credit).
If you decide to shop around for a cheap loan from lots of lenders ensure that their searches will be flagged "Inquirey Only"...
T&K.
Employment Background Checks: A Jobseeker's Guide (Score:5, Informative)
Nolo Link on the subject (Score:5, Informative)
Credit reports. Under the Fair Credit Reporting Act or FCRA (15 U.S.C. 1681), employers must get an employee's written consent before seeking that employee's credit report. Many employers routinely include a request for such consent in their employment applications. If you decide not to hire or promote someone based on information in the credit report, you must give the person a copy of the report and tell them of their right to challenge the report under the FCRA. Some states have more stringent rules limiting the use of credit reports.
Your loan officer is wrong... (Score:1, Informative)
For the sake of argument, lets just say I heard this from them. When you do a pull for a full credit report, it drops your score 5 points for a 12 month period. A simple check that credit card companies do to "pre-qualify" you for a credit card doesn't impact your score at all.
What does this mean? If your employer pulls your record, it nicks your score. Thats something places like Lending Tree don't tell you -- and I know a bunch of people who have been bitten by it. Each pull drops your score 5 pts for a year, and the places that send your application to multiple banks cause "n" pulls of your record. If you use Lending Tree and decide that you don't like any of those offers, you may find you *can't* get anything anywhere else, because the 20-25 points your score drops can easily push you out of a desirable range if you don't have not only good credit but a sufficient quantity of good credit.
Again, little birdie told me.
Re:You've got to be kidding me.... (Score:5, Informative)
- income
- debt ratio
- every late payment on either revolving credit (r1 thru r9) or installment credit (i1 thru i9) drops you points. 1==a month late 9==written off
- every inquiry where credit was not granted drops you 20 points
Every inquiry by businesses goes into your file - which is why, if you want to check your credit rating, you shouldn't have a friend "take a peek at the office". You can call equifax to get your report. Your query doesn't affect your score. Notification to this procedure effect appears on the screen before you submit a query (at least where I work).Now, every instance where an inquiry was made, that resulted in an extension of credit, adds points.
So, too many inquiries by businesses will affect your total score. Most people don't know this, and the credit reporting agencies don't want to be bothered fixing their software to differentiate between employment-related queries and credit-related queries.
What's worse, they will also obtain the list of other employers who've also done this, so they know where you've interviewed!
Re:Credit checks do NOT lower your credit score (Score:5, Informative)
I got this "bad information" here [howstuffworks.com] among other places. Here's a link to a shorter explanation from the Fair&Isaac website [myfico.com], the people who make the credit score and provide them to Transunion, Equifax, etc.
Sorry, but 10% of your credit score is how many credit checks you've had in the last year. It's not at ALL neutral, unless you're the one checking. If someone told you that, they were misinformed. Here's an excerpt from the site I linked to...
# 35% of the score is based on your payment history. This makes sense since one of the primary reasons a lender wants to see the score is to find out if (and how timely) you pay your bills. The score is affected by how many bills have been paid late, how many were sent out for collection, any bankruptcies, etc. When these things happened also comes into play. The more recent, the worse it will be for your overall score.
# 30% of the score is based on outstanding debt. How much do you owe on car or home loans? How many credit cards do you have that are at their credit limits? The more cards you have at their limits, the lower your score will be. The rule of thumb is to keep your card balances at 30% or less of their limits.
# 15% of the score is based on the length of time you've had credit. The longer you've had established credit, the better it is for your overall credit score. Why? Because more information about your past payment history gives a more accurate prediction of your future actions.
#10% of the score is based on the number of inquiries on your report. If you've applied for a lot of credit cards or loans, you will have a lot of inquiries on your credit report. These are bad for your score because they indicate that you may be in some kind of financial trouble or may be taking on a lot of debt (even if you haven't used the cards or gotten the loans). The more recent these inquiries are, the worse for your credit score. FICO scores only count inquiries from the past year.
# 10% of the score is based on the types of credit you currently have. The number of loans and available credit from credit cards you have makes a difference. There is no magic number or combination of types of accounts that you shouldn't have. These actually come more into play if there isn't as much other information on your credit report on which to base the score.
This is specifically allowed by the FCRA (Score:5, Informative)
For reference, the FCRA (Fair Credit Reporting Act) can be found at:
http://www.ftc.gov/os/statutes/fcra.htm
Is it necessary to your job? (Score:3, Informative)
http://www.itslegal.com/infonet/employ/hired.asp
Do you handle large sums of money for the company? Are you in a position of trust for binding the company to contracts?
Then I'd say you must submit.
-A
Actually, hardly "unthinkable" (Score:2, Informative)
Um, actually, I don't even think it's that unusual. If you're interviewing at a company in a high-risk sector, you're perfectly entitled to ask for a look at the company's balance sheets for some reassurance that they'll actually be around in a few years to keep you employed. That's one of those "question" things that people are always saying you should ask during interviews, and an important one at that. Most employers would probably be impressed that you thought about it at all, actually. It shows a concern for the health of the overall company, not just your personal bank account; they like to see that sort of thing
On a related note: These days, with the telecom industry in such disarray, I routinely ask for financial verification from contractors or local exchange providers when we're evaluating services. Usually, they just respond with some favorable clippings from the trade press, but it's better than nothing, and I'm sure if I wanted to, I could see their balance sheets, though I might have to agree to an NDA of some sort.
Some food for thought.
Re:the reverse is unthinkable (Score:5, Informative)
One piece of advice he gave me was to never say no.
If they ask for a drug test, do not just say no. If you do, then you are being uncoopperative, and they can leverage that against you.
The trick is to say sure you will, in return for X, where X is something that sounds reasonable, but that they cannot meet. Alternatively make X something that protects higher interests.
Whether you agree with unions etc, I cannot deny my dad was very good at it - so I take his advice seriously.
Re:Hate to say this to you... (Score:2, Informative)
Granted, US unemployment rate was about 3% for a while, which is one of the lowest ever, so it's certainly on the rise, but 6% isn't quite in the panic range yet. Just figured I'd clear that up.
Re:Google (Score:5, Informative)
http://toolkit.cch.com/text/P05_1575.asp
Plus the text:
Federal Laws for Credit Checks
The Fair Credit Reporting Act of 1971 regulates the use of consumer credit reports as a part of background checks on applicants. Hiring is a permissible purpose to do a credit check under the law, but you must keep the results confidential and must not put the results of the check in the person's personnel file.
If the credit report shows that the person declared bankruptcy, then you also have to comply with provisions of the federal Bankruptcy Act. Under the Bankruptcy Act, you may not discriminate against an applicant solely because a credit check reveals that an applicant has sought protection under the Bankruptcy Act, been insolvent before seeking protection under the Act, and not paid a debt that is dischargeable under the Act. In other words, bankruptcy is not a valid reason to deny employment.
Disclosures you must make. You must:
* Clearly and accurately tell the applicant that an investigative consumer credit report may be made that could include information on the individual's character, reputation, personal characteristics, or mode of living.
* Make the disclosure in writing, on a separate piece of paper (not as part of your job application). Your credit reporting agency can provide you with forms to be used for this purpose.
* Mail or otherwise deliver the notice to the individual not later than three days after the date on which the report was requested.
* Include with the disclosure a statement informing the applicant of his or her rights to request disclosure of the nature and scope of the investigation required.
* Have the applicant sign the disclosure document and return it to you. Be sure to keep this in your files.
* If requested by the individual, make a complete and accurate disclosure of the nature and scope of the information sought not later than five days after the date on which the individual made the request, or five days after the investigative report was requested, whichever is later.
Business Tools
A sample Fair Credit Disclosure Act notice appears in the Business Tools area.
If you do deny employment because of something on the credit report (and remember, it must be something other than bankruptcy), you must:
* inform the job applicant that employment was denied because of the credit report investigation, even if the credit report wasn't the only reason
* furnish the individual with a copy of the credit report, along with a summary of the individual's credit rights.
The Federal Trade Commission is very specific regarding the format of the consumer credit rights notice that must be provided to an employee or applicant if adverse action is contemplated. Fortunately, federal law requires credit reporting agencies to provide a copy of this notice with each credit report. You can use this notice to fulfill your own notification responsibilities.
You have VERY FEW right, but this might help (Score:4, Informative)
1) Find out if you state allows the screening of applicants.
2) If declined the Fair Credit Reporting Act requires (Federal Law) requires that:
a) You are provided with a written letter indicating why you are being declined. They MUST be specific. They can't just say your FICO score was too low.
b) They are required to tell you where they got the information from
c) They are required to allow you to dispute anything on the report.
Complaints can be filed with the Federal Trade Commision. Macy settled out of court with the FTC over Credit reports a few years ago. They weren't telling people why they didn't get the job.
In one case a CRA had added several extra zero's to a disputed debt. Making the person seem unfit for a management position.
IANAL.
Re:w00t (Score:2, Informative)
Corporate Credit Cards (Score:3, Informative)
Re:But he's a DIRECTOR (Score:3, Informative)
I believe this position was the *other* kind of director - a high middle management position, typically a direct report to a vice president. The VP is considered an officer of the company and is privy to what the SEC considers inside information as a part of his job duties. A director typically isn't an officer.
If you're convicted of a felony, or even certain types of misdemeanors related to financial mishandling, then you often cannot legally serve on a board of directors or even executive staff (the CEO, COO, CFO, and top VPs). This may even extend to having had personal bankruptcy or declaring bankruptcy at a company at which you were previously an officer. I don't think a credit check is typical here, but would not be inappropriate, especially these days.
Most board of director-type seats are delivered via the old-boys-club-in-a-smoky-room, so until recently, a lot of these technical formalities were just blown off.
Credit Records (Score:1, Informative)
All you need to do is to call the credit record agency and report that you might be a victim of identity fraud and out like to place a password on your accounts.
Worked for my brother, works for me.
Re:Negotiating Visibility and Terms (Score:4, Informative)
(Nevada has on many of their forms and in their laws mention of this, including a provision that all such restrictions be abolished if the Federal law mandating them is repealed.)
Also, child support violations are often felonies (thank Clinton) which also cause loss of civil rights, licensability, etc.
These factors can make it illegal for a person to work in a certain position and/or illegal for a company to hire/refuse to fire such an individual.
So it might not be a matter of corporate fascism as much as Federal mandate.
Re:You've got to be kidding me.... (Score:5, Informative)
I can tell that you're an american. In truth this seems like a discussion that concerns mostly americans. While I agree with some of your points, most of what you say seem rather alien to me. I live in the EU where most countries either has been or are currently being governed by social democrats. We've got this idea called solidarity. This is the idea that even though we're different we should all try to pull together. As a consequence most european countries have free healthcare. The only people in Denmark (where I come from) I know of that would ever consider paying for health treatments are profesional sportspeople who need to be ready in the shortest possible amount of time and so will pay to go to a private clinic or hospital (of which there are very few).
You seem to think that people who are "perfect" shouldn't be punished for others imperfections. We believe that if at all possible people shouldn't be punished for their imperfections either, since it is precious few who are indeed perfect.
I will finish by mentioning that inquirering about an employees credit history is I believe illegal in Denmark. And I know for sure that to some extent it is even illegal to ask for an employees criminal record (although for many kinds of jobs it is standard and legal).
Re:BAD...Credit scores reflect frequent credit che (Score:5, Informative)
That being said, inquiries (or checks) on your credit fall into two distinct categories: hard and soft.
Hard inquiries are inquiries that are initiated per your attempt to aquire credit, usually applying for new credit, sometimes by requesting credit limit increases. These stay on your reports for two years and do indeed knock a few points off of your FICO score per inquiry. The FICO formula only pays attention to hard inquiries in the past six months...anything older is not factored into your FICO score, but a creditor may still use it for approval decisions. Multiple inquiries in a one month period while shopping for auto or mortgagee loans are treated by FICO as a single inquiry.
Soft inquiries are inquiries that can be created by viewing your own credit report, a current creditor doing an account review, employer checks and those nice unsolicited preapproval letters you get from credit card companies. These inquiries also stay on your report for two years, but they are ONLY viewed by you and have NO effect whatsoever on your credit score.
Re:has this happened to anyone in Europe ? (Score:2, Informative)
My wife works for a building society in the UK. She has a purely technical role - no contact with money and certainly no means of misappropriating any. Despite this, it is standard practice to perform a credit-check on all employees.
So in answer to this post, and the one below - it most certainly does happen in Europe. Well in the UK at lest!
useful information (Score:3, Informative)
Experian
Call Experian at 888 397 3742 to order your free credit report
Equifax
Call Equifax at 800 997 2493 to order your free credit report
TransUnion
Call TransUnion at 800 888 4213 to order your free credit report
Second point, I recently received my reports from them, and interestingly found one institution that had checked my credit: the US dept. of State (from when I had applied for a job there).
Is this a reasonable use of credit checking? For a national security position? What does your credit report have to do with that?
Re:You've got to be kidding me.... (Score:1, Informative)
Re:Credit check... (Score:3, Informative)
Because of a previous marriage I have terrible credit. I'm not one to pass blame and act like I had nothing to do with a situation I was involved in, but in this case, I didn't have anything to do with it. My ex-wife bounced a large number of checks and hid this from me just long enough to cause lots of problems. It was a mess to sort out and although I was able to get most of it straightened out, and she was able to avoid jail time, I now have bad credit. That being said, at my previous job I had a company credit card even though my boss knew what kind of credit I had. He knew me, knew what kind of a guy I am, and trusted me. I only used the card when I had to for work purposes and there was never an issue.
But when you are interviewing someone you've never met before, you want all of the information you can get. While I have bad credit, I understand why I may get turned down for a job because of it. I realize that a lot of people have stellar credit and that says something about them 90% of the time. Sure some people have bad credit due to luck or whatever, but most people with bad credit have it because they were not wise with their money. At least that could have been said a while back. Now with all of the people out of work, I think the majority of America does or soon will have bad credit. Times are tough and I'm very thankful that I'm self-employed and not looking for work.
This same topic was on NPR a few days ago (Score:2, Informative)
From the report, they mentioned that it is illegal for your employer to fire you based on your credit report
However, as with any discrimination lawsuit, it is sometimes difficult to prove that this was the reason your employer let you go (or refused to hire you in the first place). They can easily site another reason.
Agree, an example... (Score:4, Informative)
Every time they ask me to sign the document, I send the same questions back to them, they say "we'll ask the lawyers", and I don't hear from them for a year.
Re:Employment Background Checks: A Jobseeker's Gui (Score:4, Informative)
Why is it that people don't feel they should make a link when they post a URL?
Re:You've got to be kidding me.... (Score:2, Informative)
I just filled out the $12 Equifax report + score and was shocked to see a credit card in my name with a $7,500 limit and $6,000 balance -- and a significant number of past due problems.
As such, my rating is in the toilet. I've started the official dispute problem -- hopefully this will get resolved promptly.
I've had 2 car loans -- perfect payments. I am in the middle of a lease -- perfect payments. The same goes for my single credit card. But this one outstanding debt has blown my rating away.
EVERYONE should check their rating -- especially if they have never done so before!! If I recall correctly, the Secret Service recommends checking once a quarter to help keep on top of identity theft. I only wish I would've checked sometime after 10/2001!
Re:Here.. (Score:2, Informative)
Would you have asked for an IQ test of Clinton when he was in a state of arousal? He was there quite freqently, even when talking to foreign dignataries on the phone.
Last I checked, Bush isn't calling for air strikes on Asprin factories when it's politically convienent either.
People like you will wake up some day and realize Bush isn't the moron you think he is. You'll also realize exceptionally high intelligence doesn't necessarly make for good Presidents. Take President Carter, for instance.
Good character, good judge of other's character, the the ability to smell BS from your underlings are much more important traits for a President then genius IQ. Until you understand this, do the country a favor and please don't vote.
EDGAR is your friend (Score:3, Informative)
At any publically traded US corporation, you can go to the SEC [sec.gov] EDGAR database of all Federal filings with respect to the financial condition of a company.
The suits for the most part tell the truth in these reports, because lying can get corporate officers a quick trip to Club Fed.
As an exercise, go to the EDGAR database and look up the report (either 8K annual or 10Q quarterly, I'm not sure which) in which MS discusses its potential trouble from Open Source.
If you're thinking of working for a company, it's your responsibility to get this kind of info before signing on. If they're in the kind of financial trouble that will interfere with the promises they made you before hitting you up for a credit report, be assured they won't tell you themselves.
Re:You've got to be kidding me.... (Score:4, Informative)
It depends on state (Score:3, Informative)
In some states you can not be held to a change in polisy unless you get a promotion. A promotion
It is likley that your state employment agency has these guidlines on line. such as boli [state.or.us] for oregon.
Talk to a lawyer. Find out what your rights are.
If I ever found out I lost a job opportunity because of a credit report, I would sue.
Credit is not a indcator of a good employee. My credit rating suck, why? I was out of work for 3 months. almost everyday my boss thanks me for working here because I am pulling there product back from the brink of disaster.
I know men whose ex-wife screwed them over, should they not be able to work?
Check your employment contract (Score:1, Informative)
No attempts to fight, but I have said 'no'... (Score:2, Informative)
I don't object to that, largely because, again if I have shown that I abuse trust to the extent that I end up convicted, it seems reasonable for my employer to not want to give me the keys to the equipment storeroom.
I've had two potential employers who wanted to do tests that I was unwilling to do. One was a drug-test, and the other a credit check. Why did I think this was unreasonable?
Well, they had my resume, and they made it clear that they would check it and my references for accuracy. If they're going to go to that much trouble to verify my background, what does the credit or the drug test tell them? It doesn't tell them anything useful. If I have a bad credit rating, but I've held all these positions, accomplished all of these tasks and my former employers think I'm great, does that mean they should hire only people with bad credit ratings? If my drug-test comes back clean, how do they know I will keep up good performance? Perhaps it was only my meth habit that let me get all those machines installed in a timely manner.
The point is that the additional information tells them nothing. And worse, it might open up liability for the company. In most states, even at will ones, disciplinary actions and such that are based on things that cannot be directly connected to requirements of the job itself are considered torts.
Last but not least, if the criminal background and credit check were not disclosed in their offer letter, I think you might have some leverage. In California, at least, I have yet to see an offer letter that doesn't list all the things the offer is contingent upon.
FYI: I'm not a lawyer, and am not offering legal advice. Consult a labor attorney or the local office of your relevent state agency for more information.