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HOME > Influence > Government > Legislators > H.R. 3149 Hearing, 9/23/2010

U.S. House representative testifies employers use credit scores

As the consumer reporting agencies deny providing scores to employers, a congressman refers to credit score use in employment screening

Also, see

National Financial Literacy Month, 2011 (video),
Myth: Employers use credit scores


10/21/2010

Consumer reporting agencies Equifax, Experian and TransUnion all state that they do not provide credit scores for employment purposes.


Despite that, on September 23, 2010, in a legislative hearing conducted by the U.S. House Financial Services Subcommittee on Financial Institutions and Consumer Credit, U.S. Representative Steve Cohen (D-TN) testified,

The use of credit checks to determine employment is a growing trend, but a dangerous trend. And while some submit that it's an effective tool— that business must find it effective— I would submit to you, Mr. Chairman and members of the committee: There's no way business can know its effective because if they don't give a person a job because of a bad credit score, how do they know that was a bad employee? They never hire anybody that had a bad credit score if they use that as the determining factor not to hire them.
(webcast video, 9:51)

Cohen is the sponsor of H.R.3149, the Equal Employment for All Act. He has not replied to requests for substantiation of his contention.

Also appearing before Congress that day was Adam T. Klein whose written testimony states, "The use of credit scores to screen out employees has a significant impact on applicants who are people of color."

However, fellow witness Judy Goodkind, testifying on behalf of the National Association of Professional Background Screeners said, "It is important to mention that in the context of employment checks, a credit score is never included." (video, 49:34)(written statement includes a sample consumer report)

She spoke immediately after Klein, but it is unknown if they compared notes.

Other debates

Last week, someone using the name "Norm Magnuson" commented on a blog post on the website justjobs.com. The original poster stated, "The Society for Human Resource Management data shows that only 13% of employers look at credit scores for all job applicants, while 47% consider it when a candidate is being considered for a position that requires handling money."

The commenter said, "Vanessa, credit scores are not developed or used for employment purposes."

Last year, SHRM clarified its survey, stating that it does not refer to credit scores, only "credit checks." Norm Magnuson is the name of the vice president of public affairs of the Consumer Data Industry Association, the consumer reporting industry trade group.

Elsewhere in Washington, furthering the notion, the Equal Employment Opportunity Commission even named yesterday's scheduled discussion "Panel 4: Review of Scientific Research: Are Credit Scores a Valid Predictor of Job Performance?"

But, a lawyer scheduled to address the commission in Panel 3 indicates that the mere premise of the question is misleading. Her firm went to the trouble of distributing a press release that explains why saying employers use scores is more than nuance:

There seems to be a common misperception that employment credit reports include a credit score,” said [Pamela} Devata. “They do not. Before an employer is able to make a decision based on a credit report, the employer must review the content of the full report to obtain credit information and assess whether it is positive, negative, or neutral. This requires more than a mere glance at a numeric score; rather, employers must conduct a thoughtful analysis of the information contained in the report.

John Ulzheimer calls the idea that employers can get credit scores "the myth of the decade." And, he has chops: He is qualified and admitted as an expert in both federal and state courts, is an alumnus of both credit score company Fair, Isaac (now FICO) and consumer reporting agency Equifax, and, now, is president of Consumer Education at Credit.com.

The meme is perpetuated in subtle and overt ways. Here are two examples, one from the New York Times, and one from consumer reporting agency Experian.

From: Greg Fisher
Sent: Saturday, October 09, 2010 7:06 PM
To: Phyllis Korkki, assignment editor, Sunday Business Section, New York Times
Subject: credit score, employers, New York Times

You wrote, "That's a strong argument for checking your credit report for mistakes, and developing a good explanation if your credit score is genuinely poor (as it may well be if you've been out of work for a while)."

Who is your source regarding credit score use by employers?

--
Greg Fisher
The Credit Scoring Site
creditscoring.com
PO Box 342
Dayton, Ohio 45409-0342
[phone]

From: NYT, thesearch
Sent: Wednesday, October 13, 2010 3:07 PM
To: greg@creditscoring.com
Subject: RE: credit score, employers, New York Times

Dear Mr. Fisher:

This was simply my statement as part of the column. Employers do check credit scores (as the Society for Human Resource Management confirms) and so it just makes sense to check your score for mistakes if you are applying for a job.

Best,
Phyllis Korkki

From: Greg Fisher
Sent: Wednesday, October 13, 2010 3:42 PM
To: Phyllis Korkki, assignment editor, Sunday Business Section, New York Times
Subject: RE: credit score, employers, New York Times, SHRM surveys

SHRM told me that their surveys did not discuss credit scores.

Will you make a correction?

From: NYT, thesearch
Sent: Friday, October 15, 2010 12:03 PM
To: greg@creditscoring.com
Subject: RE: credit score, employers, New York Times, SHRM surveys

There is no correction needed. Some employers do check credit scores.

There is no doubt that this occurs. I was not referring to a SHRM survey.

Best,
Phyllis

From: Greg Fisher
Sent: Friday, October 15, 2010 1:42 PM
To: Phyllis Korkki, assignment editor, Sunday Business Section, New York Times
Cc: Jennifer Hughes, media affairs specialist, Society for Human Resource Management; Mary Cornatzer, business editor, Raleigh News & Observer; Lieber-Column, Ron; John Ulzheimer, president, Consumer Education, Credit.com; Executive Editor, The
Subject: RE: credit score, employers, New York Times, names, source

If you are correct, then you are onto something big because the consumer reporting agencies do not provide credit scores for employment purposes. In April, your publication reported, "Employers can generally use credit checks - but not credit scores - during the employment process as long as they obtain written permission from the potential employee."

Do you believe in a credit score black market?

On the other hand, another of your colleagues writes, "FREE CREDIT SCORES The basic problem in the credit reporting world is that consumers still don't have free, unlimited access to the information that companies and employers use to judge them."

And finally, at http://www.nytimes.com/info/credit-score/news/, John Ulzheimer states: "Most credit score experts know that scores are not used by employers but you'd be amazed at who thinks they are. This video shows what happens when people incorrectly use the term 'credit score' interchangeably with 'credit report.'"

Thanks for the plug.

Name two employers who check credit scores.

What is the name of the person or document from SHRM confirming that employers check credit scores?

Who is your editor?

From: NYT, thesearch
Sent: Friday, October 15, 2010 3:36 PM
To: greg@creditscoring.com
Subject: RE: credit score, employers, New York Times, names, source

Hello,

I did not realize that you were questioning the word "score." I thought you meant credit reports You are saying I used "score" and "reports" interchangeably.

I see your point and will get back to you on this.

Best,
Phyllis

From: NYT, thesearch
Sent: Friday, October 15, 2010 4:18 PM
To: greg@creditscoring.com
Subject: RE: credit score, employers, New York Times, names, source

Hello, Mr. Fisher:

I just went back over what I wrote, and I don't feel it is inaccurate. There is only one place where I refer to a credit "score," and that is where I say an applicant should develop a good explanation if his or her score is poor. This would be a result of the applicant checking the score, not the employer. From seeing that the score was low, the applicant would realize that the report received by the employer would raise questions. In all other places I refer to checks and reports.

I do appreciate your careful reading of the article, and I will certainly be more aware of the distinction in the future!

Best,
Phyllis

Here is what I wrote:

Most employers contract background checks to other companies, he said, and these usually focus on things like whether a résumé is accurate, Mr. Aitken said. For certain positions, employers may also perform criminal and credit checks, he said.

Employers must obtain your permission to check your credit, but turning them down doesn't bode well for your application, Mr. Maltby said. And if the employer rejects you for the job, offering some credible reason, he said, who's to say it wasn't actually because of the credit report? That's a strong argument for checking your credit report for mistakes, and developing a good explanation if your credit score is genuinely poor (as it may well be if you've been out of work for a while).

Phyllis Korkki
Assignment Editor
Sunday Business
The New York Times
[phone]

From: Greg Fisher
Sent: Wednesday, October 20, 2010 6:02 PM
To: NYT, thesearch
Cc: Jennifer Hughes, media affairs specialist, Society for Human Resource Management; Mary Cornatzer, business editor, Raleigh News & Observer; Ron Lieber, columnist, Your Money; John Ulzheimer, president, Consumer Education, Credit.com; Bill Keller, executive editor, New York Times
Subject: RE: credit score, employers, New York Times, rationalization/delusion

Whew! That was close!

I'll put you down as a reformed Believer.

When you're that important, they name a font after you.

More directly, Experian (despite its other statement (see above)) reports, "More Employers Check Applicants' Credit Scores."



The Gregory Brothers


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Do employers use credit scores?

Don't believe it.


April, 1997: "Information on how to obtain one's credit score is suspiciously absent from your site. How do I get mine?"

"And we're not running a game show. I mean, we're evaluating risk. We're not trying to have people get--achieve the highest score."

"Fisher is a fan of going by the book and then beyond it."

"He beat the scoring proponents to the punch by scooping up the web address http://www.creditscoring.com, from which he launches often strident, sometimes wacky, but usually well-documented attacks on the credit-scoring concept and the industries that support it."

Realty Consumers Empowered By Online "Peoples" Court - "His Web site CreditScoring.com helped him-- and millions of other consumers-- extend fair credit reporting rights to credit scoring information."

"Fisher operates the www.creditscoring.com Web site, which skewers the secrecy of the credit bureaus and Fair, Isaac." - The Detroit News

"CreditScoring.com is an exceptionally-interesting site that offers news and information regarding credit scoring and-- really-- the entire credit process."

"'Garbage in, garbage out,' says Greg Fisher of Dayton, Ohio, who runs two Web sites on the subject, creditscoring.com and creditaccuracy.com."