Employment credit reports do not include credit scores

Reports about the practice vary

By Greg Fisher
April 24, 2008. Updated January, 2014.

When it comes to the rules for credit score use in pre-employment screening, it is hard to know what to believe. Bombarded by people in high places saying two entirely different things, government, business, media and litigators have created a buzz that will not die.

The low point came in late 2007 when Visa USA put on a big dog^[1]-and-pony show about the alleged use of credit scores in employment. But Detroit newspaper columnist Brian O'Connor thought that sounded peculiar. He ended up talking to a top representative of credit bureau Experian who told him, "We do not score^[2] for employment reports... If you chose to do that, I think you would be breaking the law."

VISA's press release isn't on its website^[3] today.

Pre-employment screening reports-- with no scores

TransUnion answered an email:

From: creditscoring.com
To: Steven Katz, TransUnion
Date: Tuesday, April 22, 2008, 9:54 AM
Subject: credit score, job

Do you allow employers to use credit scores in pre-employment screening?

Do TransUnion pre-employment screening reports include credit scores?

From: Steven Katz, TransUnion
To: creditscoring.com
Date: Tuesday, April 22, 2008, 11:12 AM
Subject: RE: credit score, job

TransUnion does not provide a credit score for employment screening purposes.

ChoicePoint's website chides, "ChoicePoint does not offer credit scores for purposes of employment-related background checks and no reputable ^[4] background screening company or employer uses credit scores as part of the hiring process."

Lester S. Rosen, a lawyer and president of Employment Screening Resources, a pre-employment screening and credentials verification firm lays it out:

Even though credit reports are utilized by some employers for particular positions, a “credit score” is not a tool used for pre-employment screening. For pre-employment credit reports, the credit bureaus use a special reporting format that leaves out the credit score, along with actual credit card account numbers, and age. Credit scores are not valid predictors of job performance and therefore are not part of a pre-employment screening.

For pre-employment credit reports, the three major credit bureaus use a special reporting format that leaves out ^[5] actual credit card account numbers, credit risk scoring and age.

The non-profit consumer organization Privacy Rights ClearingHouse gives a definition that says that credit scores are excluded:

An employment report provides everything a standard credit report would provide. However it doesn't include your credit score or date of birth. Nor does it place an "inquiry" on your credit file that may be seen by a company looking to issue you credit. Having too many credit inquiries tends to lower your credit score.

Universal Background Screening provides access to the TransUnion PEER (Pre-Employment Evaluation Report) and Experian Employment Insight Report. Neither of the samples on their website contain a credit score.

Employment Background Investigations also has a sample of the PEER.^[6]

Q&A from something called the FINRA, "the largest non-governmental regulator for all securities firms doing business in the United States":

Does the Equifax PERSONA PLUS Report include a credit score?

No, the PERSONA PLUS Report does not^[7] include a credit score based on the requirements of the Fair Credit Reporting Act (FCRA). Based on FCRA requirements and various state guidelines, PERSONA PLUS does not provide: credit score, age, date of birth, marital status, number of dependents, race, color or creed, or account numbers.

And their sample of the Equifax PERSONA PLUS^[8] shows no score (and it's only $3.00).

Another sample PERSONA report has no score (dated March 8, 2007). A brochure dated 2003 on Experian's website shows a sample of the Employment Insight "employment screening tool.^[9]"

But poor VISA wasn't the first to say scores are used.

Government

State of Washington: "Employers may check credit scores^[10] when evaluating job applicants."

State of New Jersey: "Many companies use your credit score when you are seeking credit, a loan, utility hook-ups, and even a job." (alt^[11])

U.S. Equal Employment Opportunity Commission meeting, April 19, 2006

I think -- and I was very happy to hear some of the comments this morning -- that these two are married, "these two" being the compliance manual and the task force, because I think they have to be married.

If you are going to attack racism in the workplace, you need to attack it through a systemic investigation attack. And I think it was Dianna Johnston who talked about one of the things that both the compliance manual and the task force talk about as ferreting out hidden discrimination.

And I think that's really one of the things that we all grapple with. How do you get to that internal bias that many of us may not want to admit that we have? And I think that is going to be the fight in the future, which leads me to what I want to highlight, sort of two emerging trends.

The one I want to talk is sort of unbundling. What am I talking about? What I am talking about there is a situation. And we talked about it earlier today. Credit scoring, for example, is being used by 30 to 40 percent^[12] of employers as an employment selection device, but they don't use it alone. It is bundled with the traditional background check. So the background check will come back with probably credit references, credit scoring, employment references, and a traditional background check, and part of that may be a background check on either arrest records or convictions.

Most persons affected will simply be told "You didn't get the job." There is no way that they know and, indeed, they're not told that "You were rejected because your credit score wasn't high enough," "You were rejected because you had arrest records."

One of the things this Commission can do is try to attempt to unbundle those in your investigation so you can try to make a determination what is occurring because the applicants simply don't know or they don't have the time or desire.

Michael L. Foreman^[13]
Deputy Director for Legal Programs
Lawyers Committee for Civil Rights Under Law

My staff and I were talking at the break about all of the concerns that we have in this area, but after listening to the morning's panel, we were kind of thinking we should narrow our focus some. And after listening to you, I'm convinced that that is what we should do. And for my part, I plan to spend the next couple of weeks trying to focus specifically on hiring and to see what more we should be doing, just trying to get a better handle. Hiring in and of itself is broad scope, from what Mr. Foreman talked about in terms of the sad but true docket but also unbundling the credit scores from selection devices^[14] and how it's used as a selection device. That in and of itself is going to take some time and some thought. And then the things that you have just spoken about, Mr. Sellers, regarding systemic testers as well as testing, I just want to assure you that you will be hearing from my staff and I as we try to focus in specifically on hiring concerns.

Naomi C. Earp^[15]
Vice Chair
U.S. Equal Employment Opportunity Commission

EEOC website

Finally, some facially neutral employment criteria are significantly disadvantaging applicants and employees on the basis of race and color. Studies reveal that some employers make selection decisions based on names, arrest and conviction records, employment and personality tests, and credit scores^[16] [new link. 2009-02-25], all of which may disparately impact people of color.[^[5]] Further, an employer's reliance on new technology in job searches, such as video resumes, could lead to intentional race or color discrimination based on appearance or a disproportionate exclusion of applicants of color who may not have access to broadband-equipped computers or video cameras.[^[6]]
"Why Do We Need E-RACE?"
U.S. Equal Employment Opportunity Commission

The studies cited are "The Mark of a Criminal Record^[17]," by Devah Pager, American Journal of Sociology (Mar. 2003), and "Are Emily and Brendan More Employable than LaKisha and Jamal?^[18]," by Marianne Bertrand and Sendhil Mullainathan, A Field Experiment on Labor Market Discrimination (Nov. 18, 2002).

Local television

WBZ-TV, Boston's^[19] intrepid reporter reports on a Massachusetts woman.

WCBS-TV, New York's^[20] intrepid reporter reports on a Massachusetts woman.

KABC-TV, Los Angeles's intrepid reporter reports on a Massachusetts woman.

Network television

NBC

"Your credit score also affects the rates on your credit cards, car loans and insurance premiums, as well as your ability to get a job, rent an apartment or take out a cell-phone contract."

CNN

Anchor Gerri Willis:

November 25, 2006

"And now some employers are even using that one number to determine if you should get a job."

December 23, 2006

"Banks use it to determine limits, and now some employers are even using that one number to determine if you should get a job."

Willis with anchor Betty Nguyen, January 14, 2007

NGUYEN: "All right. A good credit score equals a responsible employee? Sound a little crazy to you? Well, it is not so farfetched. More and more companies are using bad credit as a reason not to hire.

CNN's Gerri Willis tells us about one worker's claim against Harvard University.

(BEGIN VIDEOTAPE)... "

... "WILLIS: It is very, very common. As a matter of fact, over the last five years, the number of employers who are using this kind of testing is up 55 percent.

NGUYEN: Wow.

WILLIS: Now, they think it's an indication of how competent you are, but, in fact, low credit scores correlate with people who are low-income or minorities. And what's more, having a low credit score may not be your fault at all.

Maybe you've had a death in the family. Maybe you've had some kind of medical emergency that was really expensive. Maybe you got divorced.

So this is really unfair in a lot of ways.

NGUYEN: OK. Let me ask you, there's so many questions here, but say you have a low score and this was used to determine if you are going to get this job. Do you even know if a company is using this to determine if you're going to get a job or not?

WILLIS: They typically have to ask you, Betty, if they can use it.

NGUYEN: OK."

(you can read a lot more, here)

Some guy who testified

Lawyer Adam T. Klein, Outten & Golden LLP

Johnson & Johnson's use of credit checks is racial discrimination. Federal civil rights laws prohibit employers from using credit scores and other selection criteria without any relationship to job performance that penalize minority job applicants. That is^[21] what happened to Brenda Matthews.

Business Wire
June 16, 2004

'African-Americans are twice as likely to be denied employment based on a credit score^[22],' Klein said.

"Cut out by a credit check"
Barbara Wieland
Lansing State Journal
July 19, 2004 (alt^[23])

Scrutiny of “cutoff” scores would doom employee credit-history checks even if credit record somehow were relevant to employment. Credit record is a “score^[24],” and there is no evidence that that employers are validating whatever “cutoff” they require sufficiently to satisfy the Third Circuit’s caution that “under the Act's business necessity standard[,] . . . [a] study showing that "more is better," however, has no bearing on the appropriate cutoff to reflect the minimal qualifications necessary to perform successfully the job in question.²⁶

This is also true for the employer’s use of credit history (instead of credit score) – such as a late payment or other negative payment history reference – to determine employment suitability. Here too, the “more is better” construct is readily apparent. The employer is simply setting an arbitrary cutoff as a barrier to employment without any relation to the basic qualifications of the job. Can an employer validate the use of a 30-day late payment reference on a credit history report to lawfully bar employment? The answer is obvious.

et al
May 3, 2007

"Statistics show that in the retail sector, the use of credit scores^[25], for example, borders around 40 percent, meaning that 40 percent of U.S. retailer employers use credit history, credit score as a factor in determining employment suitability."

U.S. Equal Employment Opportunity Commission Meeting
May 16, 2007

Update, 5/2/2008

To: Experian Media Relations
From: creditscoring.com
Date: Tuesday, April 22, 2008, 10:56 AM
Subject: credit score, job

Do you allow employers to use credit scores in pre-employment screening?

Do Experian pre-employment screening reports include credit scores?

Subject: FW: credit score, job
Date: Thursday, April 24, 2008, 12:41 PM
From: Susan Henson, Experian
To: creditscoring.com

Hello Greg,

Thanks for your question. No, Experian's business policy prevents the inclusion of credit scores with an employment report, at Experian called Employment Insight.

Some of the information Employment Insight includes:

Consumer identification
Address information, including length of time at current and previous addresses
Employment information re: an applicant's previous work history
Other names used, such as maiden names and aliases
Public record information on bankruptcies, liens and judgments against the applicant
Credit history providing an objective overview of how financial obligations are handled (BUT NOT INCLUDING A SCORE)
Demographics Band (including driver's license and phone number verifications), Profile Summary (including payment patterns)

You can get more information, including information about consumer rights to receive a copy of their personal report at:

http://www.experian.com/products/employment_insight.html

Thanks and please feel free to contact me directly if you need more information.

Best regards,

Susan Henson
Director, Public Relations
Experian
[phone]
[email address]

To: David Rubinger, vice president, communications, Equifax
From: creditscoring.com
Date: Tuesday, April 22, 2008, 10:51 AM
Subject: Fwd: credit score, job

Do you allow employers to use credit scores in pre-employment screening?

Do Equifax pre-employment screening reports include credit scores?

From: David Rubinger, Equifax
To: creditscoring.com
Cc: Jennifer Costello, Equifax
Date: Thursday, April 24, 2008, 4:42 PM
Subject: Re: Fwd: credit score, job

I am out of town on vacation and just received your message from Tuesday. We do not knowingly provide scores for pre employment screening.

If you have any further questions, please contact Jennifer Costello at the above email address.

Thank you.

David Rubinger

Update January 15, 2014

Employers do not use credit scores.

According to the International Business Times, a vice president of the Consumer Data Industry Association said, "Scores aren't used for employment in any way[SIC] shape or form."

However, despite their 2008 statements above, the three, main national consumer reporting agencies—Equifax, Experian and TransUnion—all made claims that employers do use credit scores. Fair Isaac, a credit score company known for its scores named FICO, made the same false statement.

In Connecticut, a bill became law with inaccurate testimony, so the ridiculous employers-use-credit-scores myth has serious consequences. In December, S. 1837 was referred to committee in the U.S. Senate.

History

Previous versions of this document

Mother Jones links to this document (2010)

In 2013, Wikipedia linked to this document, then another. In 2014, those links in the article were gone, however one to a newspaper, the New York Times, survived.