How on earth can people be denied jobs for poor credit? You're not a creditor to your employer! Isn't this just the "social credit" system that people worry about in China, except privatised?
I applied for a job at a gas station in the late 90's. The store manager had to get permission to run a credit check that I needed for the job: The dude explained that folks with bad credit were more likely to steal from the company.
Which isn't true, of course, and they had other ways to check for theft - but this didn't stop them.
I think the burden of proof is in the other direction: if someone is going to use some sort of signal or test to determine if someone is eligible for employment, it is on them to present evidence that the signal/test actually accomplishes the objective they expect it to.
In California, it is illegal to use a credit report in employment decisions (unless the position is in finance/accounting). Clearly lawmakers have decided that this sort of test isn't helpful, and is abused to deny qualified people employment.
No, but they might want to turn away a specific employee for an otherwise protected reason. Don't want to hire a black employee? Run a credit check. Statistically, black individuals have lower credit scores than white individuals. Deny them a job based on their credit score.
While that makes some sense, I'm apparently having a hard time getting over my conception that a private business would ever give the rejected candidate a specific reason they weren't offered the position. Surely this is cultural on my part.
I have no evidence either way, but it is not absurd in my opinion to suggest that people who make poor life decisions in one area of their lives might also make poor life decisions elsewhere.
A bad credit score doesn't really mean you've made bad choices. It just means you had some bad luck.
The reasons for your bad luck can range from medical bills, job loss, missing work when poor (it snowballs) and other such things. It might mean you made a bad decision when you were 18, but it is still hanging around on your credit. You might have been in a financially abusive relationship.
Shit happens, and it is naive to think that you have absolute control over all of it. A few folks simply don't pay, sure, but you can't tell this from a credit report.
And it isn't like you are going to get credit for paying most normal bills on time. Landlords and utilities rarely report positives to the agencies.
And even with all this, it shouldn't realistically mean that folks can't get back up. Most jobs don't need credit checks, nor do most apartments (or at least, limited checks).
> A bad credit score doesn't really mean you've made bad choices.
It doesn't necessarily mean this, sure. But, if we found a thousand people with bad credit scores and did a deep audit, we wouldn't discover 1000 who had unavoidable, unpredictable misfortune. We likely wouldn't even find 500.
> Shit happens, and it is naive to think
I've heard alot of "shit happens" excuses over the years. Few of them struck me as "no matter what this person might have done, they were just fucked from day one". Shit doesn't happen, either in frequency or degree, nearly enough to explain the bad situations many are in. They tend to have alot of minor misfortunes sprinkled here and there among gigantic piles of poor decisions.
>And it isn't like you are going to get credit for paying most normal bills on time. Landlords and utilities rarely report positives to the agencies.
Funnily enough, I work adjacent to a company called Rent Dynamics, and one of the features that they offer is positive credit reporting for those who pay the rent on time. There are others that do this too.
I'm still skeptical of the concept.
Should some company hiring say "sure, he defaulted on that $18,000 of credit card debt 3 years ago, but look... he's paid his rent on time for the last 4 months knowing that if he screws that up he'll be evicted, and that counts for something!" ?
Is that feature worth the slow accretion of extra (and sometimes hidden) fees that are pushing housing/rental prices higher in an era of skyrocking housing costs? Remember, this isn't something that shows up for luxury apartments, it's for the not-quite-slums apartments.
We might find that landlords will do positive credit reporting here in the next few years, and that it's not the good thing you think it to be.
> Should some company hiring say "sure, he defaulted on that $18,000 of credit card debt 3 years ago, but look... he's paid his rent on time for the last 4 months knowing that if he screws that up he'll be evicted, and that counts for something!" ?
No, they shouldn't be looking at this in the first place, because it is -- at best! -- tangentially related to job performance. If you're worried that your employee is going to be distracted by personal financial issues, taking away their option to have steady income certainly isn't going to fix the situation.
> Is that feature worth the slow accretion of extra (and sometimes hidden) fees that are pushing housing/rental prices higher in an era of skyrocking housing costs?
What does this have to do with anything? Housing costs are skyrocketing primarily because of housing scarcity in desirable places to live (where existing residents have enacted policy to restrict further building). On top of that, we have wages that have not been keeping up with inflation, and a general increase in income inequality that helps to push housing further out of reach.
> Funnily enough, I work adjacent to a company called Rent Dynamics, and one of the features that they offer is positive credit reporting for those who pay the rent on time. There are others that do this too.
I actually feel that such companies should not be allowed to report a tradeline.
No company / landlord (and doubly so when you go with, as you say, 'not-quite-slumbs') is offering you rent in arrears. You're paying, in advance, and no credit was extended to you.
To me this is a bastardization of the credit system that's only got potential positive reporting as a side effect. Let's be real, companies like yours real customers are landlords/property managers, not tenants.
Thank you for this comment. You have shared an insight I had not come to see on my own. I doubt I would have come to it by myself.
> Let's be real, companies like yours real customers are landlords/property managers, not tenants.
They are very much so. But if we can help them be more attractive to their customers (renters), then our own products might be more sought after. Or at least that's the theory my bosses operate from.
The point is that a credit report is probably a poor signal of risk when it comes to the kinds of things most employers care about when considering hiring someone.
If you have evidence to support the idea that a credit report actually is a good signal here, then by all means, present it. If not, then the default assumption should be that it's not useful, or at the very least not equitable. We shouldn't be adding qualifications to things based on guesswork.
And in general, we very often legally require companies assume higher risk in various things (including hiring) in the name of anti-discrimination (for one thing). We consider this to be a benefit to society. In this specific case, I want the person who has bad credit to be able to obtain steady employment (and on decent terms; not just one out of the fewer jobs they'd have to take because the others disqualified them based on their credit) because that's pretty much the only way they'll be able to improve their credit. They'll be able to become more financially stable, perhaps be able to buy a home. All of this is a benefit to the stability of society.
The thing that generally pisses me off about attitudes like yours is that it advocates for a system where when you do one thing wrong, you get further restricted in ways where you're guaranteed to do more wrong things, and every step you take -- even steps taken in good faith, in seemingly the right direction -- makes it harder to dig yourself out from under the mess.
I've found that the people with these attitudes are usually those who have either a) never experienced much in the way of hardship, or b) are one of the rare cases who managed to dig themselves out, despite all the adversity, and now have a chip on their shoulder that makes them advocate for continuing to make it hard for everyone else.
> If not, then the default assumption should be that it's not useful, or at the very least not equitable. We shouldn't be adding qualifications to things based on guesswork.
In a free country, that's for them to decide. I don't think it should be a default assumption. Neither does the government, where excessive debt tends to signal a willingness to commit treason for those who try to get security clearances.
If someone would try to sell documents to the Russians because they carry a x5 debt load of what they should for their income, is it really so ridiculous a concern that they might skim the till for the same reason?
> And in general, we very often legally require companies assume higher risk in various things
Sure, when it's morally the right thing to do, or when it would create perverse incentives if they didn't.
Here? They just won't hire anyone. Self-pay at the pumps, no convenience store at all, or some horrendous gigantic vending machine deal, no employees. That doesn't serve the community, customers, and Mr.-I-Think-Credit-Cards-Mean-Free-Money gets no job.
> The thing that generally pisses me off about attitudes like yours is that it advocates for a system where when you do one thing wrong,
It wasn't "did one thing wrong". It's always "did one thing wrong, then like a misbehaving child decided to do five other things wrong out of spite or for shits and giggles or whatever."
And that behavior's just dangerous to fucking society as a whole.
> I've found that the people with these attitudes are usually those who have either a) never experienced much in the way of hardship, o
Then I'm your counter-example. Grew up on food stamps. Remember living out of a car when I was a kid. Free school lunches. Not just for a little while, first through highschool.
> and now have a chip on their shoulder that makes them advocate for continuing to make it hard for everyone else.
The universe makes it hard on them, and everyone else. Stop expecting others to try to make it easy on screwups.
Well, people can be denied jobs for almost every reason (except a couple explicitly listed taboo reasons i.e. protected classes), so if any employer believes that defaulting on your debt correlates with e.g. trustworthiness of a candidate, they are free to use credit rating as (dis)qualifying criteria - no matter if that belief is true or not.
Sure, but just because something is legally allowed, it doesn't mean we're not permitted to argue that it's a bad practice.
Some places don't legally allow this, so we should think about why: because it's abused, perhaps? Because it furthers discrimination?
The list of current protected classes isn't some holy thing; we can and should add to things that companies aren't permitted to discriminate based on, when those things are found to be harmful to people and society.
Someone with poor credit may be assumed more likely to commit fraud or steal from the company. Someone with poor credit might also be assumed to be personally irresponsible and lazy, and more likely to slack off, ignore necessary details or cut corners.
It isn't fair but in the US money carries moral weight, and many people assume the less of it you have, the worse of a person you are.
If you live in California your credit score can’t be factored into hiring unless you directly deal with company finances in a specific way, namely in the roles of accounting or finance.
Even if you’re a software engineer working on financial software you’re exempt because you have no direct and common access to the company purse.
There’s a few other states that have laws like this I can’t recall them though l
Your statement is still true if you remove "in debt" from it. The question is whether or not being in debt (or having poor credit) meaningfully increases the chances of someone taking the offer from that bad actor. I'm not convinced it doe.
>Owing money around really does sound like something a bad person would do.
Why would this be your default assumption? People can end up owing money for any number of moral reasons. I'd rather someone have 10,000 in debt because they borrowed to help someone with medical debt who would have died otherwise, than for that hypothetical person to die because of a lack of money. From there, it's easy to posit someone losing their job to be a caretaker for said hypothetical person. Et voilà, there's your unpaid debt yet (IMHO) for completely moral reasons. My opinion on debt has substantially changed once I encountered "Debt : the First 5,000 Years".
Except no one has presented any evidence that bad debt is an indicator of job performance issues.
Car insurance providers have a ton of data that correlates all those factors you mentioned, so for the most part it's reasonably fair for them to set rates based on that. No such data exists when it comes to debt and employment, as far as I can see. Just a bunch of people here arguing back and forth for their personal opinion.
There isn't any evidence, it isn't actually true. Debt is inescapable in a country where a trip in an ambulance can wipe out a family's entire income. It's just a cultural prejudice born from the American idolization of free markets (which itself is a vestigial expression of European classism and belief in noble divinity), rugged individualism (and a pathological fear of societal bonds) and the Protestant work ethic, mixed with a bit of racism and xenophobia.
That's a weird position to take, considering that one of the foundational concepts of the global financial system is debt. Without debt, our financial system would look very different, and almost certainly not in a good way.
Using debt wisely as an individual is a great way to be able to have and do things that you wouldn't otherwise be able to have and do, and it's perfectly possible to manage that responsibly.
In my 20s I had a girlfriend who considered it a negative that I was carrying educational debt. Despite the fact that a) I was easily making my monthly payment and living within my means, and b) taking on that debt allowed me to attend a top-tier university, which ended up opening several doors in my later professional life that likely would not have otherwise been open to me. My life (15+ years later) is immeasurably better for having taken on that debt, which I fully repaid years ago.
Sure, there's such a thing has taking on too much debt, and being unable to service your debt within the financial framework of your income and expenses. But even if that happens, you're most like not a "bad person". Financial literacy and education in many places (especially the US) is not particularly great, so it's no surprise that many people make bad financial decisions.
It isn't about owing money or even debt. You can be in a lot of debt and have good credit. You can also have very little debt and have very poor credit because you couldn't pay a hospital bill or didn't get the final electric bill from your old apartment paid before it went to collections.
It is really about keeping poor people out. You might be able to argue something about responsibility if you can prove that they could pay the debt and chose not to.
Disagree. There's no intent to keep poor people out. Someone who has little but doesn't spend too much will generally have good credit.
Creditors these days tend to treat medical debt separately--someone who has only medical debt probably is someone who is responsible but something happened to them. Likewise, back in the era of the housing collapse and strategic default creditors would look at someone who had a foreclosure but nothing else far more favorably than someone who had a variety of debt issues.
Someone who has little but doesn't spend too much will generally have good credit.
No. Living within your means makes you wind up with no credit.
Utilities and landlords rarely report your on-time payments, after all. You have no history, and you need to prove yourself instead of the lenders assuming you are responsible.
And I'll mention here that different places hound folks with a recent bankruptcy, despite a variety of debt issues that led to bankruptcy.
And you can't even measure responsibility from whether or not it is medical debt. I struggled in my early to mid 20's because my then spouse wound up with a major mental health issue. He wound up on disability, and before (and sometimes after) would take money from our account or out of my purse. I know in hindsight that I should have taken different actions, but I didn't think about it in the midst of constant stress.
And at least I was finally able to leave, some years too late, but that shouldn't be required. I left due to unhappiness, not because of the illness. It would be worse if it were a child's sickness that caused the struggle - the bills might be in the spouse's name instead of yours. None of that would show up on a credit report.
Get a store card, use it for things you would have bought anyway. You can build from there. Note that your credit report doesn't really care about how much you borrowed, but how good you were about paying it back.
> Someone who has little but doesn't spend too much will generally have good credit.
No, that metric has nothing to do with it. The main things that affect your credit score are a) age of oldest credit line, b) on-time payment history, c) amount of available credit, d) credit utilization.
While "not spending too much" can be correlated to (b) and (d), it's not always a particularly strong correlation.
And even if you do all those things right, one bill -- even for $50 -- sent to collections (because your automated bill pay randomly stopped working and you didn't notice for several months -- this happened to me) can knock 50-100 points off your credit rating. Sometimes you can get this fixed, but the biller has no obligation to send a correction to the credit bureaus even if you pay the $50 and explain why you missed the bill. Enjoy waiting 7 years for that negative report to "scroll off" your score calculation. It just did for me a few months ago, and despite the fact that I have otherwise excellent credit, I was surprised how much my score went up after this was off my record.
Ah, yes, that matters so much when applying for a gas station attendant job.
But please, most people have debt! Mortgages, a car loan, educational debt. Revolving credit card debt, even if they pay off the statement balance every month. (Maybe you personally don't, but you are not typical if that's the case!)
Sure, if you have debts that you are having trouble paying, maybe you'd be more susceptible to accepting a bribe or caving to blackmail? But c'mon, for most jobs out there this is just not a consideration.
Most homeowners have debt. So do lots of folks that own cars. And credit cards. And poor people unfortunate enough to wind up in the hospital with sub-par health insurance. And 18 year old college students with bad judgement about credit cards.
Are all of these folks more susceptible to bribes and blackmail? This is a sizeable portion of the population.
Does bad credit of someone that just declared bankruptcy make someone more susceptible?
Couldn't a company just lessen this by paying well so that folks can get out of debt?
The reality is that credit rating has a strong correlation with responsibility. Thus, for example, in places where it's legal to do so insurance rates will be different.
This does end up sweeping up a few who were hit by unavoidable circumstances but most people who get in credit trouble were skating too close to the edge.
The fact that in some (many?) places it's illegal to set insurance rates based on credit reports should tell us something: that at best they're an unreliable measure, and at worst they're (ab)used to discriminate.
> The reality is that credit rating has a strong correlation with responsibility.
No, the reality is that responsibility is but one component of credit rating - another, moreso, being 'how attractive are you as a customer to credit providers'.
This is why your score might drop when you pay off an account, or close it. Defenders of the system and CRAs will say "well, there's less information to assess your creditworthiness now that that account is closed", as if, say, you had ten years of on time payments on that account, but they mean nothing.
Note that exceptions to the correlation has both false positives and false negatives.
e.g. On opposite side of people with bad credit who got hit by unavoidable circumstances, there are people like my partner who have limited credit score upside because they don’t use much credit. My partner has a mortgage with me, but other than that, she doesn’t have any debt and doesn’t use credit cards (other than the prepaid variety which pull directly from bank accounts and don’t contribute to credit scores.)
Because for the most part, private companies who you have alienated yourself from have competitors, and don't enforce their displeasure with you at the end of a bayonet while holding shackles. State Level credit system is an actual dystopia.
