He been laid off early in the recession and then had the bad fortune of tearing tendons in his knee just when he didn’t have health insurance. The job market was terrible and he had been out of work for more than a year. But the managers at the first two shoe stores to which he applied in the summer of 2010 seemed to be taken by his résumé. He had sold shoes for six years at Salvatore Ferragamo on Fifth Avenue and later at J. M. Weston, where a pair of men’s dress shoes can cost $2,000. The manager at one shop was already discussing salary. The other, he said, invited him to fill out the paperwork normally done on the first day on a job.
“Who does that if they’re not planning on hiring you?” Mr. Carpenter asked.
Yet neither job materialized. One manager, he said, “basically hung up on me.”
A friend at Bergdorf Goodman, the high-end clothier, secured him an interview for an opening in the shoe department. But when Mr. Carpenter confided to his friend that his finances were a mess, “he tells me, ‘Oh, you’ve got bad credit? They’ll never hire you.’ ” Sure enough, a week or two later, Mr. Carpenter said, he received a notice from Bergdorf informing him that while running a credit check, the store found information that played a role in its hiring decision. It was a so-called adverse action letter that by law a business conducting a credit report is supposed to send to an applicant.
Mr. Carpenter kept applying for jobs and kept checking off the box granting his would-be employer permission to look into his past. And he kept being turned down. There was the recession and there may have been dozens of applicants for each of these jobs. But while Bergdorf was the only company to follow up a job rejection with an adverse action letter, Mr. Carpenter became convinced that his credit report was a curse.
“No one lets me explain, ‘Hey, I had this freak injury when I didn’t have health insurance,’ ” he said. “It’s black and white: ‘You have these bad marks on your record, you don’t get hired.’ ” Down to his last $200, he applied for and was granted food stamps and federal housing assistance.
“There’s no reason,” he said, “a strong, able guy like me should have to go on welfare.”
PEOPLE tend to think of banks and other lenders as the main users of credit reports. But over the last several decades, credit reporting bureaus have been selling their services to a much wider range of buyers.
“Credit reports are really seeping into the soil,” said Sarah Ludwig, co-director of the Neighborhood Economic Development Advocacy Project, a New York-based nonprofit. “It’s taken an outsized role in employment, housing and insurance.”
For those seeking a job, it can lead to what Chi Chi Wu, a staff lawyer at the National Consumer Law Center in Boston, calls “a bizarre, Kafkaesque experience.”
“Someone loses their job,” Ms. Wu said, “so they can’t pay their bills — and now they can’t get a job because they couldn’t pay their bills because they lost a job? It’s this Catch-22 that makes no sense.” It can also be a kind of backdoor job discrimination, Ms. Wu contends, given the numerous studies that demonstrate that those black, Latino or simply poor are more likely to have lower credit scores than those who are white and have means.
Experian, one of the big three credit reporting bureaus, states in its marketing materials, “Credit information provides insight into an applicant’s integrity and responsibility toward his or her financial obligations.”
But to Ms. Wu and others, a credit report says more about a person’s economic circumstances than his or her moral character. “Some people can go to daddy and say, ‘I can’t pay my bills, will you bail me out?’ ” Ms. Wu said. “And others can’t.”
Nearly half — 47 percent — of employers use credit checks when making a hiring decision, according to a 2012 survey by the Society for Human Resource Management. Most businesses use credit checks only to screen for certain positions, but one in eight, the survey found, does a credit check before every hire. “We’ve heard from dozens of people over the past several years who say they’re being denied jobs specifically because of a credit check,” Ms. Ludwig said. The people contacting her group, she said, are “mostly lower-wage workers,” especially those applying to big retail chains.
“Prohibiting the use of credit checks in employment is now our number one campaign,” Ms. Ludwig said. “Because it’s discriminatory. And because the last thing we need in a recession is another barrier to employment.”
Lawmakers in some jurisdictions have proved sympathetic to those arguments. Nine states have adopted legislation that curbs the use of credit reports to judge prospective hires — seven of them since the start of 2010. Representative Steve Cohen, Democrat from Tennessee, has sponsored federal legislation that would restrict their use. The New York Legislature and the New York City Council are considering strict new laws that would greatly limit an employer’s ability to do credit screening.
Advocates and lawmakers are already seeing the impact of their efforts. The Society for Human Resource Management started polling members about use of credit reports as a pre-employment tool in 2004. Over the years, the numbers were consistent: six in 10 businesses indicated that they used them. But in its most recent survey in 2012, that number fell to just below five in 10. That decline no doubt is the result, in part, of new state prohibitions and the attention the issue has received in the last few years, said Kate Kennedy, a spokeswoman for the society. But she also notes that her association has been educating its members in the importance of looking at “how relevant a credit check is for a particular position.”
That is bad news for the big three credit reporting bureaus: Experian, TransUnion and Equifax. But how bad is anyone’s guess. None of the three reveal what portion of overall revenue is derived from employment-related credit checks. Even if they did, the number would only offer a partial picture, said Terry W. Clemans, executive director of the National Consumer Reporting Association, an industry trade group based in Roselle, Ill. “There are several hundred companies out there that specialize in employment screenings,” he said.
Mr. Clemans saw the rapid increase of employment screening through the 1990s and into the 2000s, and considers the rising concern about its use in the last few years “hysteria.” “Credit is one data point that businesses are using to get an overall feel,” Mr. Clemans said. “Does this consumer have a lifestyle that fits the job? Is this someone who I can trust?” It is not the only factor.
“People are assuming because they checked that box agreeing to a consumer report and they were late in paying their Visa bills, that’s why they didn’t get a job,” Mr. Clemans said. It’s easier to blame the credit bureaus, in other words, than to accept that you weren’t the best possible candidate.
STEVEN BURMAN is the founder and president of Credit Advocates, a nonprofit in New York that helps consumers who have credit problems. In the past, people who were rejected for bad credit for a job in financial services might show up for help, but by and large his clients were trying to secure a home loan.
“What’s changed over the last four or five years is now I’m hearing from all these people who are concerned about finding work,” he said. And instead of stockbrokers, Mr. Burman is seeing “regular people looking for blue-collar low-wage jobs” such as security guard or retail clerk.
The problem is most pronounced among women he counsels at a homeless shelter in the Bronx. Those clients are almost all out-of-work single mothers. “They all want to do the right thing,” he said. “But they have terrible credit and none of them can get jobs because of it. It’s a vicious cycle.”
Despite his sympathy for his clients, Mr. Burman told me that he never makes a full-time hire at Credit Advocates without first pulling that person’s credit report. An employee dealing with bill collectors could be a distracted worker, he said. And how financial problems are explained could offer insights into an applicant’s character: Does he take responsibility for debts, or does she blame problems on someone or something else?
“I see it as the start of a dialogue,” he said.
Besides, a credit check is relatively inexpensive. A basic employment screening package can cost $19 to $50 per applicant. “If you have five people and can’t make up your mind, why not pull credit reports?” Mr. Burman asked. ....source by karinagk.blogspot
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