7 ms·

The Long Shadow of Bad Credit in a Job Search

56 points by Futurebot 13y ago

tptacek 13y ago
Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do, outside of a very few roles and an even smaller set of companies (trading exchanges, for instance) with genuine and easily documented concerns about embezzlement or susceptibility to bribery? My point being: no, I don't think anyone here thinks widespread credit report pulling is reasonable. Was anyone on HN unaware of the fact that some companies do request authorization to pull credit reports during the hiring process? I'd be surprised, but maybe there are. Obviously, my subtext is: what is this post doing on HN?
- Paul_D_Santana 13y ago
  > Obviously, my subtext is: what is this post doing on HN? A large part of HN is about finding (or creating) employment.
- jerrya 13y ago
  It helps to talk about it. Even if we all agree the practice is malodorous, without public discussion of it, we are apt as individuals to concede to it as we believe we have no alternatives. It's similar to the puzzle interviews which are controversial and many people here dislike. By talking about it, by raising it and discussing again and again their negatives, it helps raise awareness of strategies on how to avoid them, what to do when one is encountered, and can even raise awareness in people that do like them as to why they are problematic and encourage them to find alternatives within their company. FWIW, I think credit pulls are obnoxious, and even so, yes, I have been asked to consent to them as well as background checks for jobs which should not need them at any time. And it's Saturday.
  - illuminate 13y ago
    A better comparison would be required non-competes, puzzles aren't nearly as harmful as either.
  - illuminate 13y ago
    A better comparison would be required non-competes, puzzles aren't nearly as harmful as either.
- jjoonathan 13y ago
  > Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do That's not the pertinent question. Since it's already happening, the trend can only be reversed through confrontation, and confrontation only happens if people think that pulling credit reports is an unreasonable thing to do (as opposed to not having an opinion on the practice). Otherwise people are inclined to say nothing if it so happens that they have the ear of someone responsible for making the decision (or are such a person). The default position propagates the bad practice, making it vitally important to force people to choose one side or the other before they unwittingly endorse the status quo.
- gav 13y ago
  > Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do I would if the evidence suggested that a credit report was a good indicator of the risk of the candidate committing an offence, and that the candidate is applying for a position where they have the ability to do such. I suspect that the probability of either event is small, and that it's worthless and discriminatory. My major concern is that the practice turns into a catch-22--you need a job to get out of debt, but you can't get a job with debt. I worked at a major financial institution where a pre-requisite was drug, credit, and background testing (even running fingerprints) for everyone. The whole thing seemed a big waste of time.
- yummyfajitas 13y ago
  outside of a very few roles and an even smaller set of companies (trading exchanges, for instance) with genuine and easily documented concerns about embezzlement or susceptibility to bribery? Ok, I'll be that guy. The risk is that an employee with bad credit might be more likely to steal or take bribes, and you acknowledge that this is a potential risk for some employees (e.g., comptroller of NASDAQ). Why do you believe it is a risk that the comptroller of NASDAQ might embezzle, but not a risk that a guy selling $2,000 shoes might swipe a few $100 bills from the register?
  - daeken 13y ago
    > Why do you believe it is a risk that the comptroller of NASDAQ might embezzle, but not a risk that a guy selling $2,000 shoes might swipe a few $100 bills from the register? Let's take a practical example here. I've had my credit run when consulting for certain clients (software security). If I were a malicious actor and, say, intentionally left vulnerabilities out of a report to use them for my own, it may never be detected. The likelihood of someone discovering that you are stealing from the register is much, much higher. Now, do I think that a credit score correlates to these activities in the least? No. But I can certainly see why they'd do it for people with access to critical systems and not your average joe working at a shoe store.
    - jiggy2011 13y ago
      Yep, modern retail chain stores basically work under the assumption that their staff will steal everything if given half a chance.
    - walshemj 13y ago
      Your right background checks are acceptable for say TS /DV clearance jobs but a shoe shop FFS
      - daeken 13y ago
        I wonder how effective background check + credit check is versus background check on its own. Finding a known felon is easy enough, but discovering that someone may become a felon? That's tough.
- eldavido 13y ago
  This is on HN because it gratifies one's intellectual curiosity [1]. Moreover, it's an important public policy topic that affects a large number of people in the US and beyond. That said, I believe employers are well within their rights to run credit checks on their employees. Granted, it might not be useful, but nobody's forcing anyone to apply to a job, either. [1] http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html
  - rquantz 13y ago
    If you are on welfare, the government is forcing you to apply for a job. That was the result of the 90s "welfare reform." Edit: also, I don't think HN's top commentor needs to have someone give him a link to the guidelines. That being said, I agree with you that this is relevant.
- olefoo 13y ago
  It could be that the under- and unemployed are heavily overrepresented in online forums. It's one of the few places where they can be treated as equals. And also, given the nature of the site, many people here are taking risky financial moves that involve non-traditional employment and the hope of future rewards; and knowing that your plan B could be completely screwed up by something that happens to you because plan A goes up in smoke in a disastrous fashion ( say your business gets sued by a patent troll or you lose customer data to carders because your contract programmer had a severe lack of clue ); that's likely to be a concern.
- lawnchair_larry 13y ago
  You likely have exposure to several consulting companies other than just your own (via NCC if nothing else), but how is this usually dealt with in the security consulting industry? I have had a few clients request my credit reports to do assessments. Do consulting companies typically bend over for those? I declined, but it was pretty clear that most or all consultants they talked to in the past agreed to it, and I was the exception. For what it's worth, this client had nothing to do with finance or national security, and there would be no PII involved. Amusingly, the largest of clients I've worked with and the most sensitive information and IP I've handled never involved anything beyond an NDA.
  - tptacek 13y ago
    We try to keep consultants from signing anything at all; that's why we have a legal department. But there are some clients that require explicit background checks, and we case-by-case them. I'm not aware of anyone here authorizing a credit check. We have no idea what anyone's credit score here is.
- rdl 13y ago
  I think NACLC is necessary but not sufficient for most important roles (either executive or operational; devops/ops, or developers in an environment without good dev/ops separation). In general any process which PFC Manning could pass is insufficient for personnel security screening, and any process which is one point in time vs. ongoing is also insufficient. Maybe not for a shoe salesman, but for something technical, sure. Maybe not for some crappy social game, but for a platform, or anything touching finance, or anything security related (other than purely exploit development on public code).
georgemcbay 13y ago
We've (very recently... in my lifetime) created a society in the US where it can be almost impossible to distance yourself from early mistakes. Or in the case of the guy here, something that isn't even a mistake you made really but a failing of our horrendous health care situation. While there are sometimes systems in place to deal with this (eg. the 7 year window after which most things fall off credit reports), there's a nasty feedback loop that can't really be accounted for with statutes of limitations. "Ok, you don't have a $40,000 charged off medical bill due anymore, but why weren't you working for the past 7 years?" It isn't just with credit either, I commented on something semi-related about a month ago here: https://news.ycombinator.com/item?id=5433720 https://news.ycombinator.com/item?id=5433720. While there are positive aspects to this permanence in some cases, there's a lot of negative too.
- eldavido 13y ago
  I think we're experiencing the worst of this now. As more data gets aggregated, it becomes easier to find something bad about everyone. Maybe, in our mutually tarnished futures, the collective conscience of employers will see the absurdity of holding something against someone from 10+ years ago.
- michaelochurch 13y ago
  The main moral debate going on with regard to employment is what it's OK to have happen to someone who's unlucky, and how much regulation we're willing to put in place to protect those who are unlucky. Most people who have bad credit were unlucky. They had unexpected losses of income or medical problems that their insurers wouldn't cover. However, most people would agree that it's OK for someone to be denied a house loan or credit card because of bad luck in the past. Loans aren't rights. They aren't necessities for living. If you can't get a mortgage, rent. It sucks to have your housing choices thus limited, but it's not exactly a life-wrecking catastrophe. Jobs are different. Society has agreed, repeatedly, that bad luck shouldn't make a person unemployable; that everyone has the right to seek appropriate work. We make black-listing illegal and non-compete agreements non-enforceable (if they preclude employment outright as opposed to actual bad-faith competition) for that reason. The problem is that there are a lot of companies that don't want to play by these rules. They really want to be like the comic-strip boss who throws two-thirds of the resumes in the trash and says, "I don't want to work with unlucky people". What I think people should do, personally, if they meet onerous follow-on request is to fake time pressure (or use real time pressure if it exists). "I have a Friday deadline on an offer, and won't be able to turn it down unless I have an offer letter from you." If the offer letter says, "contingent on <X>" where X is something onerous (like a credit check for a non-finance job) then you may want to ask what you get if you don't get the offer, negotiate until it's acceptable (again with the time pressure) and get that in writing.
learc83 13y ago
Businesses don't use IQ tests in general because the tests have a racial bias. Considering that income and debt to income ratio are racially skewed as well, wouldn't credit reports display the same bias, and require that companies prove that there is a legitimate business case in order to use them?
- Estragon 13y ago
  It's unethical (and stupid) to use IQ tests for hiring decisions because they have very little predictive power with respect to job performance. If a measure has such predictive power, it's not necessarily unethical to use it just because it also correlates with race. I don't actually know whether bad credit is predictive for job performance, though the story for why it might be is easy to imagine.
  - Zak 13y ago
    The story for why an IQ test would correlate with good job performance is also easy to imagine, but it doesn't appear to match reality. I never see studies finding a correlation between credit scores to job performance when I read about this issue, which makes it puzzling that employers continue to use them. Could it be that the people making the decisions here are making them based on the credit reporting agencies' marketing rather than concrete data?
    - Estragon 13y ago
      I was commenting on a problem with the argument that they shouldn't be used because they may have a racial bias. I don't really have a position on whether credit reports are a useful tool in hiring decisions.
  - nazgulnarsil 13y ago
    >because they have very little predictive power with respect to job performance. Care to back that up?
  - yummyfajitas 13y ago
jstalin 13y ago
If a potential employer decides not to hire you based on a credit report, they are required to notify you of that fact and the fact that you have a right to get a copy of your credit report. This sounds like a juicy area to start suing employers that don't follow the law. https://www.emplscreen.com/Notice1.pdf https://www.emplscreen.com/Notice1.pdf
- deleted 13y ago
  [deleted]
- gwern 13y ago
  > This sounds like a juicy area to start suing employers that don't follow the law. How do you establish an employer didn't hire you because an HR person saw your credit report and didn't like it?
  - kabdib 13y ago
    See if they pulled the report. They could go through an intermediary, but you could make that unlawful (the current credit agencies are one step just above "hearsay" anyway) and aggressively enforce it. Not that it would happen.
    - gwern 13y ago
      Would that be sufficient for a court of law, that merely the company ordering it is sufficient to incriminate them?
- eldavido 13y ago
  It's very gray. I was just talking to a friend who works on Capital One's funds availability policies, and with complicated multi-factor models, it's difficult to discern whether the credit report was really the factor that led to adverse action.
  - tzs 13y ago
    There was some discussion of this in Professor Abu-Mostafa's "Learning from Data" class at Caltech. You can use machine learning techniques to build systems that are very good at saying whether or not you should give someone credit. If your system say no, though, you have to tell the applicant why credit was denied. The banks are pretty sure that they can't get away with just saying "well, this big black box that we got some Caltech professor to build for us looked at all our prior customers and decided you are too similar to the bad ones". They need to say something specific. I wonder if one could approach this by fiddling the inputs and rerunning the check, trying to find a reasonable minimal tweak that would produce approval. Then report those tweaked parameters as being the reason for credit denial. For example, if you deny a car loan, run the check again with higher income, and if you find that this gets an approval, report that the loan was denied because their income was too low. I asked about this on the class forums, and Abu-Mostafa said it was interesting, but he didn't know if it would satisfy the legal requirements.
nraynaud 13y ago
I've been told that having no debt at all is like having a bad credit score in the US, and a bad credit score is a big problem for a lot of stuff like renting a house, is it true? I'm thinking about emigrating there, so it might be a big issue.
- rollo_tommasi 13y ago
  That's not quite accurate. Having no credit history is typically a flag, not having no current debt.
  - nraynaud 13y ago
    I don't get the difference, can you detail please?
    - eldavido 13y ago
      (Good) credit history happens from a repeated pattern of meeting one's financial obligations, including mortgage payments, utility bills, student loans, car payments, etc., and not doing financially reckless things like overdrawing bank accounts, skipping town, etc. Generally one needs to have owed money to have a credit history, but this isn't the same as not having debt.
      - nraynaud 13y ago
        but isn't the fact of having never borrowed money, and have always saved before buying stuff even safer than taking any obligation whatsoever? also, paying your phone bill on time gives you a good credit rating?
        ImprovedSilence 13y ago
        >> paying your phone bill on time gives you a good credit rating I don't know about phone bills, but electric and gas bills, yes. Also, so does being signed to a lease and paying rent. And as stated above, just having a credit card, even if you only charge like $20/month and pay it off every month will help tremendously.
balabaster 13y ago
Why don't you just NOT check the "Allow them to check my credit" box? Your financial well-being is nobody else's business - except perhaps your spouse, your accountant and your potential creditors.
- Zak 13y ago
  Most people probably think doing so will also reduce their chances of being hired. They're probably right.
  - balabaster 13y ago
    They're less likely to waste their time getting almost all the way through the interview process only to fall at the finish line. Better to spend your time elsewhere. Besides - there's many legitimate reasons not to want people checking your credit... every credit check is a hit against your credit score and thus may negatively impact future ability to get credit for things like auto loans and mortgages.
  - balabaster 13y ago
    ...and it still seems to me that the easiest way to get hired for a job is to work hard to be the best at whatever it is you do. Then when someone thinks "Oh, we need someone to do X job, everyone says 'This is the guy you need'," instead of having to go in through the front door like the rest of the unknowns. Your reputation should already have walked in the door long before you even know there's a job there for you. At that point, nobody looks at or cares about your credit.
    - Zak 13y ago
      That works for the kind of people who frequent HN. With lower-end jobs, there may not be a large enough difference between average and best to matter. Most of the people interviewed for the articles were seeking relatively unskilled positions.
- eli_gottlieb 13y ago
  Most job-offers I've seen in the software industry require authorizing a background and credit check to take the job. But that was in the neofeudal USA.
rayiner 13y ago
One aspect of using credit scores for employment is that its monumentally discriminatory against people from lower income backgrounds. My (now-) wife and I ran out of money at the end of the semester during law school a number of times. A quick bailout from the bank of daddy was all it took to fix the problem without hurting our credit. People whose parents have money generally don't ruin their credit while young. People who don't can get in a lot of trouble with exactly the same level of responsibility.
- rm999 13y ago
  Lenders don't want poor people to have low credit scores per se - they want people who won't pay back their loans to have low credit scores (I know it's sort of obvious, but I know this for a fact because I've worked with/around credit score modeling). The lack of money and the inability to pay back loans just happen to correlate very strongly so poor people are more likely to have lower scores. In your case the credit score worked as intended because the "bank of daddy" will also likely be there in the future. You may have an unfair advantage, but that advantage is you were born with money; the fact that your credit score is higher is just a direct result of this. edit: I should make it clear that I'm not talking about using credit scores for employment, which I think is absolutely discriminatory and misguided from the employer's perspective.
  - farinasa 13y ago
    So it makes me wonder if he paid income taxes on that money. My guess would be no. I would guess the situation is similar for all those born with money. This makes this advantage doubly unfair.
    - rayiner 13y ago
      Gifts aren't taxed until a lifetime limit of $5 million is exceeded, after which anything above $13k/year is excluded.
  - deleted 13y ago
    [deleted]
amalag 13y ago
Too many applicants if they can discriminate on that. Those positions will be filled by someone.
venomsnake 13y ago
Seems like blind auditions for every job are some basis for a solution for company above certain size. http://en.wikipedia.org/wiki/Blind_audition http://en.wikipedia.org/wiki/Blind_audition
- jiggy2011 13y ago
  How would that work outside of music?
  - venomsnake 13y ago
    Employers are forbidden from collecting any information about the employees outside of expertise.
chevas 13y ago
FICO is crap. All it does is indicate how well you borrow and pay it back. Your credit score should not be a measure of how well you "do what you say you are going to do" -- which is what it has become. The guy in this article is case-and-point--he had a run of bad luck. There are better ways to measure one's reliability and maybe someone here can disrupt the transunion-equifax-experian trifecta or create a new business out of measuring candidate quality for all kinds of things (rentals, jobs, etc.) that doesn't rely on debt. Even the person who is self-made / cash-only has to contend with this buffoonery.
- eldavido 13y ago
  Agree 100%. There's a more general notion of conscientiousness [1] that, without evidence, seems the really deep, meaningful thing we should measure. Credit score is crappy because cash-only people won't have it and it's effectively monopolized by three data providers with who-knows-what for commercial/financial incentives. [1] http://en.wikipedia.org/wiki/Big_Five_personality_traits http://en.wikipedia.org/wiki/Big_Five_personality_traits
rquantz 13y ago
Does anyone know if this is a common factor in hiring programmers? I would expect not given the job market, but I havent applied for a job in a few years.
- EmmEnnEff 13y ago
  I've underwent three credit checks, for the past 3 jobs I took. (Two US-owned Canadian branches, and a Valley megacorp)
csense 13y ago
Companies that deny people jobs based on factors that don't directly affect job performance (credit report, race, whatever) will have their lunch eaten by those who don't. In other words, not hiring Mr. Carpenter represents a missed opportunity for those companies. If an experienced dress shoe salesman normally brings down $25 an hour, but Mr. Carpenter is desperate and willing to work for $20 an hour instead, the company that doesn't care about his credit and hires him anyway can save $5 on their hourly labor costs. In fact, as long as Mr. Cooper is underbidding, it doesn't matter how much he underbids; hiring him is still a win-win situation if he asks for $24.75 an hour. Why does this problem need regulatory solutions when plain old capitalism will do? On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world?
- bdcs 13y ago
  Because people/companies aren't the rational actors tradition economics makes them out to be. Case in point: low credit scores are uncorrelated or even positively correlated with good job performance (cf. the featured article's citations). Yet regardless, companies still base hiring decisions off of them (in the wrong direction, the data suggests). Mr Carpenter had to go through undue hardship due to ignorance and stereotyping of poor people. In summary, I hope Adam Smith's invisible hand slaps some sense into these companies.
- jiggy2011 13y ago
  The "invisible hand" often works very slowly. By which time Mr Carpenter has been out of work for 3 years and is no longer the hot property he once was.
  - csense 13y ago
    I doubt that shoe salesmanship skills become obsolete anywhere near as fast as web development skills.
- learc83 13y ago
  >On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world? I think what you're seeing is the effect of credit monitoring agencies marketing departments. Sure over the long term those companies that discriminate based on credit may lose out, but in the short term HR managers are going on the word of Equifax/Transunion/Experian that checking new hire's credit history is beneficial. The history of business is full of stupid trends that aren't supported by the evidence.
onemorepassword 13y ago
I don't endorse doing credit checks on candidates, and it's certainly not something I would ever do myself, but I can testify to the fact that employees with financial problems can be an incredible drain on the company and can have a major negative influence. I do however live in a country with strong social security and healthcare, so financial problems are relatively more often the result of personal issues rather than just bad luck.
- jiggy2011 13y ago
  How were they drains on the company? Was it just correlation between financial problems and people who were a "drain" or where they continually asking for extra pay or stealing things to pay back debts?
- greenyoda 13y ago
  "I can testify to the fact that employees with financial problems can be an incredible drain on the company" Most people have problems at some point in their lives that impact their ability to concentrate on their work. An employee could be going through a divorce or other relationship break-up, or have health problems or have family members with health problems. Are employers going to try to dig up this kind of information about potential employees as well? Where does society draw the line? For that matter, I imagine that many employees who have financial problems would make an extra effort to succeed at work, since they really need the income.
zimbatm 13y ago
In the UK, I didn't see another company than Experian doing credit reports. To know your credit report, you have to subscribe to a 30-days-free-then-£14.99-per-month thing. And they ask you for tons of info that they can use to improve their file on you. Every time that a business asks a credit report on you it lowers your score for a while. I'm sure the businesses are also paying to get access to your credit report as well. It seems to be a very lucrative business.
rdl 13y ago
A lot of the reason to run a credit check as part of NACLC is to get a list of addresses and thus to help with the national/local agency checks part of the process. I'd find it hard to care if someone had a $50k medical debt and bankruptcy, particularly if disclosed before it was required, but knowing someone lived in Florida and had outstanding Florida warrants for check kiting and identity theft (sigh; I had this happen!) would be useful, and derived from the credit report. I actually had to pay off some 6 year old disputed $20 collection agency stuff right before I did NACLC myself, just to make it cleaner.

56 points by Futurebot 13y ago

Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do, outside of a very few roles and an even smaller set of companies (trading exchanges, for instance) with genuine and easily documented concerns about embezzlement or susceptibility to bribery? My point being: no, I don't think anyone here thinks widespread credit report pulling is reasonable. Was anyone on HN unaware of the fact that some companies do request authorization to pull credit reports during the hiring process? I'd be surprised, but maybe there are. Obviously, my subtext is: what is this post doing on HN?

Paul_D_Santana 13y ago
> Obviously, my subtext is: what is this post doing on HN? A large part of HN is about finding (or creating) employment.
jerrya 13y ago
It helps to talk about it. Even if we all agree the practice is malodorous, without public discussion of it, we are apt as individuals to concede to it as we believe we have no alternatives. It's similar to the puzzle interviews which are controversial and many people here dislike. By talking about it, by raising it and discussing again and again their negatives, it helps raise awareness of strategies on how to avoid them, what to do when one is encountered, and can even raise awareness in people that do like them as to why they are problematic and encourage them to find alternatives within their company. FWIW, I think credit pulls are obnoxious, and even so, yes, I have been asked to consent to them as well as background checks for jobs which should not need them at any time. And it's Saturday.
- illuminate 13y ago
  A better comparison would be required non-competes, puzzles aren't nearly as harmful as either.
- illuminate 13y ago
  A better comparison would be required non-competes, puzzles aren't nearly as harmful as either.
jjoonathan 13y ago
> Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do That's not the pertinent question. Since it's already happening, the trend can only be reversed through confrontation, and confrontation only happens if people think that pulling credit reports is an unreasonable thing to do (as opposed to not having an opinion on the practice). Otherwise people are inclined to say nothing if it so happens that they have the ear of someone responsible for making the decision (or are such a person). The default position propagates the bad practice, making it vitally important to force people to choose one side or the other before they unwittingly endorse the status quo.
gav 13y ago
> Does anybody at all on HN think that pulling credit reports on candidates is a reasonable thing for hiring firms to do I would if the evidence suggested that a credit report was a good indicator of the risk of the candidate committing an offence, and that the candidate is applying for a position where they have the ability to do such. I suspect that the probability of either event is small, and that it's worthless and discriminatory. My major concern is that the practice turns into a catch-22--you need a job to get out of debt, but you can't get a job with debt. I worked at a major financial institution where a pre-requisite was drug, credit, and background testing (even running fingerprints) for everyone. The whole thing seemed a big waste of time.
yummyfajitas 13y ago
outside of a very few roles and an even smaller set of companies (trading exchanges, for instance) with genuine and easily documented concerns about embezzlement or susceptibility to bribery? Ok, I'll be that guy. The risk is that an employee with bad credit might be more likely to steal or take bribes, and you acknowledge that this is a potential risk for some employees (e.g., comptroller of NASDAQ). Why do you believe it is a risk that the comptroller of NASDAQ might embezzle, but not a risk that a guy selling $2,000 shoes might swipe a few $100 bills from the register?
- daeken 13y ago
  > Why do you believe it is a risk that the comptroller of NASDAQ might embezzle, but not a risk that a guy selling $2,000 shoes might swipe a few $100 bills from the register? Let's take a practical example here. I've had my credit run when consulting for certain clients (software security). If I were a malicious actor and, say, intentionally left vulnerabilities out of a report to use them for my own, it may never be detected. The likelihood of someone discovering that you are stealing from the register is much, much higher. Now, do I think that a credit score correlates to these activities in the least? No. But I can certainly see why they'd do it for people with access to critical systems and not your average joe working at a shoe store.
  - jiggy2011 13y ago
    Yep, modern retail chain stores basically work under the assumption that their staff will steal everything if given half a chance.
  - walshemj 13y ago
    Your right background checks are acceptable for say TS /DV clearance jobs but a shoe shop FFS
    - daeken 13y ago
      I wonder how effective background check + credit check is versus background check on its own. Finding a known felon is easy enough, but discovering that someone may become a felon? That's tough.
eldavido 13y ago
This is on HN because it gratifies one's intellectual curiosity [1]. Moreover, it's an important public policy topic that affects a large number of people in the US and beyond. That said, I believe employers are well within their rights to run credit checks on their employees. Granted, it might not be useful, but nobody's forcing anyone to apply to a job, either. [1] http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html
- rquantz 13y ago
  If you are on welfare, the government is forcing you to apply for a job. That was the result of the 90s "welfare reform." Edit: also, I don't think HN's top commentor needs to have someone give him a link to the guidelines. That being said, I agree with you that this is relevant.
olefoo 13y ago
It could be that the under- and unemployed are heavily overrepresented in online forums. It's one of the few places where they can be treated as equals. And also, given the nature of the site, many people here are taking risky financial moves that involve non-traditional employment and the hope of future rewards; and knowing that your plan B could be completely screwed up by something that happens to you because plan A goes up in smoke in a disastrous fashion ( say your business gets sued by a patent troll or you lose customer data to carders because your contract programmer had a severe lack of clue ); that's likely to be a concern.
lawnchair_larry 13y ago
You likely have exposure to several consulting companies other than just your own (via NCC if nothing else), but how is this usually dealt with in the security consulting industry? I have had a few clients request my credit reports to do assessments. Do consulting companies typically bend over for those? I declined, but it was pretty clear that most or all consultants they talked to in the past agreed to it, and I was the exception. For what it's worth, this client had nothing to do with finance or national security, and there would be no PII involved. Amusingly, the largest of clients I've worked with and the most sensitive information and IP I've handled never involved anything beyond an NDA.
- tptacek 13y ago
  We try to keep consultants from signing anything at all; that's why we have a legal department. But there are some clients that require explicit background checks, and we case-by-case them. I'm not aware of anyone here authorizing a credit check. We have no idea what anyone's credit score here is.
rdl 13y ago
I think NACLC is necessary but not sufficient for most important roles (either executive or operational; devops/ops, or developers in an environment without good dev/ops separation). In general any process which PFC Manning could pass is insufficient for personnel security screening, and any process which is one point in time vs. ongoing is also insufficient. Maybe not for a shoe salesman, but for something technical, sure. Maybe not for some crappy social game, but for a platform, or anything touching finance, or anything security related (other than purely exploit development on public code).

georgemcbay 13y ago

We've (very recently... in my lifetime) created a society in the US where it can be almost impossible to distance yourself from early mistakes. Or in the case of the guy here, something that isn't even a mistake you made really but a failing of our horrendous health care situation. While there are sometimes systems in place to deal with this (eg. the 7 year window after which most things fall off credit reports), there's a nasty feedback loop that can't really be accounted for with statutes of limitations. "Ok, you don't have a $40,000 charged off medical bill due anymore, but why weren't you working for the past 7 years?" It isn't just with credit either, I commented on something semi-related about a month ago here: https://news.ycombinator.com/item?id=5433720 https://news.ycombinator.com/item?id=5433720. While there are positive aspects to this permanence in some cases, there's a lot of negative too.

eldavido 13y ago
I think we're experiencing the worst of this now. As more data gets aggregated, it becomes easier to find something bad about everyone. Maybe, in our mutually tarnished futures, the collective conscience of employers will see the absurdity of holding something against someone from 10+ years ago.
michaelochurch 13y ago
The main moral debate going on with regard to employment is what it's OK to have happen to someone who's unlucky, and how much regulation we're willing to put in place to protect those who are unlucky. Most people who have bad credit were unlucky. They had unexpected losses of income or medical problems that their insurers wouldn't cover. However, most people would agree that it's OK for someone to be denied a house loan or credit card because of bad luck in the past. Loans aren't rights. They aren't necessities for living. If you can't get a mortgage, rent. It sucks to have your housing choices thus limited, but it's not exactly a life-wrecking catastrophe. Jobs are different. Society has agreed, repeatedly, that bad luck shouldn't make a person unemployable; that everyone has the right to seek appropriate work. We make black-listing illegal and non-compete agreements non-enforceable (if they preclude employment outright as opposed to actual bad-faith competition) for that reason. The problem is that there are a lot of companies that don't want to play by these rules. They really want to be like the comic-strip boss who throws two-thirds of the resumes in the trash and says, "I don't want to work with unlucky people". What I think people should do, personally, if they meet onerous follow-on request is to fake time pressure (or use real time pressure if it exists). "I have a Friday deadline on an offer, and won't be able to turn it down unless I have an offer letter from you." If the offer letter says, "contingent on <X>" where X is something onerous (like a credit check for a non-finance job) then you may want to ask what you get if you don't get the offer, negotiate until it's acceptable (again with the time pressure) and get that in writing.

learc83 13y ago

Businesses don't use IQ tests in general because the tests have a racial bias. Considering that income and debt to income ratio are racially skewed as well, wouldn't credit reports display the same bias, and require that companies prove that there is a legitimate business case in order to use them?

Estragon 13y ago
It's unethical (and stupid) to use IQ tests for hiring decisions because they have very little predictive power with respect to job performance. If a measure has such predictive power, it's not necessarily unethical to use it just because it also correlates with race. I don't actually know whether bad credit is predictive for job performance, though the story for why it might be is easy to imagine.
- Zak 13y ago
  The story for why an IQ test would correlate with good job performance is also easy to imagine, but it doesn't appear to match reality. I never see studies finding a correlation between credit scores to job performance when I read about this issue, which makes it puzzling that employers continue to use them. Could it be that the people making the decisions here are making them based on the credit reporting agencies' marketing rather than concrete data?
  - Estragon 13y ago
    I was commenting on a problem with the argument that they shouldn't be used because they may have a racial bias. I don't really have a position on whether credit reports are a useful tool in hiring decisions.
- nazgulnarsil 13y ago
  >because they have very little predictive power with respect to job performance. Care to back that up?
- yummyfajitas 13y ago

jstalin 13y ago

If a potential employer decides not to hire you based on a credit report, they are required to notify you of that fact and the fact that you have a right to get a copy of your credit report. This sounds like a juicy area to start suing employers that don't follow the law. https://www.emplscreen.com/Notice1.pdf https://www.emplscreen.com/Notice1.pdf

deleted 13y ago
[deleted]
gwern 13y ago
> This sounds like a juicy area to start suing employers that don't follow the law. How do you establish an employer didn't hire you because an HR person saw your credit report and didn't like it?
- kabdib 13y ago
  See if they pulled the report. They could go through an intermediary, but you could make that unlawful (the current credit agencies are one step just above "hearsay" anyway) and aggressively enforce it. Not that it would happen.
  - gwern 13y ago
    Would that be sufficient for a court of law, that merely the company ordering it is sufficient to incriminate them?
eldavido 13y ago
It's very gray. I was just talking to a friend who works on Capital One's funds availability policies, and with complicated multi-factor models, it's difficult to discern whether the credit report was really the factor that led to adverse action.
- tzs 13y ago
  There was some discussion of this in Professor Abu-Mostafa's "Learning from Data" class at Caltech. You can use machine learning techniques to build systems that are very good at saying whether or not you should give someone credit. If your system say no, though, you have to tell the applicant why credit was denied. The banks are pretty sure that they can't get away with just saying "well, this big black box that we got some Caltech professor to build for us looked at all our prior customers and decided you are too similar to the bad ones". They need to say something specific. I wonder if one could approach this by fiddling the inputs and rerunning the check, trying to find a reasonable minimal tweak that would produce approval. Then report those tweaked parameters as being the reason for credit denial. For example, if you deny a car loan, run the check again with higher income, and if you find that this gets an approval, report that the loan was denied because their income was too low. I asked about this on the class forums, and Abu-Mostafa said it was interesting, but he didn't know if it would satisfy the legal requirements.

nraynaud 13y ago

I've been told that having no debt at all is like having a bad credit score in the US, and a bad credit score is a big problem for a lot of stuff like renting a house, is it true? I'm thinking about emigrating there, so it might be a big issue.

rollo_tommasi 13y ago
That's not quite accurate. Having no credit history is typically a flag, not having no current debt.
- nraynaud 13y ago
  I don't get the difference, can you detail please?
  - eldavido 13y ago
    (Good) credit history happens from a repeated pattern of meeting one's financial obligations, including mortgage payments, utility bills, student loans, car payments, etc., and not doing financially reckless things like overdrawing bank accounts, skipping town, etc. Generally one needs to have owed money to have a credit history, but this isn't the same as not having debt.
    - nraynaud 13y ago
      but isn't the fact of having never borrowed money, and have always saved before buying stuff even safer than taking any obligation whatsoever? also, paying your phone bill on time gives you a good credit rating?
      - ImprovedSilence 13y ago
        >> paying your phone bill on time gives you a good credit rating I don't know about phone bills, but electric and gas bills, yes. Also, so does being signed to a lease and paying rent. And as stated above, just having a credit card, even if you only charge like $20/month and pay it off every month will help tremendously.

balabaster 13y ago

Why don't you just NOT check the "Allow them to check my credit" box? Your financial well-being is nobody else's business - except perhaps your spouse, your accountant and your potential creditors.

Zak 13y ago
Most people probably think doing so will also reduce their chances of being hired. They're probably right.
- balabaster 13y ago
  They're less likely to waste their time getting almost all the way through the interview process only to fall at the finish line. Better to spend your time elsewhere. Besides - there's many legitimate reasons not to want people checking your credit... every credit check is a hit against your credit score and thus may negatively impact future ability to get credit for things like auto loans and mortgages.
- balabaster 13y ago
  ...and it still seems to me that the easiest way to get hired for a job is to work hard to be the best at whatever it is you do. Then when someone thinks "Oh, we need someone to do X job, everyone says 'This is the guy you need'," instead of having to go in through the front door like the rest of the unknowns. Your reputation should already have walked in the door long before you even know there's a job there for you. At that point, nobody looks at or cares about your credit.
  - Zak 13y ago
    That works for the kind of people who frequent HN. With lower-end jobs, there may not be a large enough difference between average and best to matter. Most of the people interviewed for the articles were seeking relatively unskilled positions.
eli_gottlieb 13y ago
Most job-offers I've seen in the software industry require authorizing a background and credit check to take the job. But that was in the neofeudal USA.

rayiner 13y ago

One aspect of using credit scores for employment is that its monumentally discriminatory against people from lower income backgrounds. My (now-) wife and I ran out of money at the end of the semester during law school a number of times. A quick bailout from the bank of daddy was all it took to fix the problem without hurting our credit. People whose parents have money generally don't ruin their credit while young. People who don't can get in a lot of trouble with exactly the same level of responsibility.

rm999 13y ago
Lenders don't want poor people to have low credit scores per se - they want people who won't pay back their loans to have low credit scores (I know it's sort of obvious, but I know this for a fact because I've worked with/around credit score modeling). The lack of money and the inability to pay back loans just happen to correlate very strongly so poor people are more likely to have lower scores. In your case the credit score worked as intended because the "bank of daddy" will also likely be there in the future. You may have an unfair advantage, but that advantage is you were born with money; the fact that your credit score is higher is just a direct result of this. edit: I should make it clear that I'm not talking about using credit scores for employment, which I think is absolutely discriminatory and misguided from the employer's perspective.
- farinasa 13y ago
  So it makes me wonder if he paid income taxes on that money. My guess would be no. I would guess the situation is similar for all those born with money. This makes this advantage doubly unfair.
  - rayiner 13y ago
    Gifts aren't taxed until a lifetime limit of $5 million is exceeded, after which anything above $13k/year is excluded.
- deleted 13y ago
  [deleted]

amalag 13y ago

Too many applicants if they can discriminate on that. Those positions will be filled by someone.

venomsnake 13y ago

Seems like blind auditions for every job are some basis for a solution for company above certain size. http://en.wikipedia.org/wiki/Blind_audition http://en.wikipedia.org/wiki/Blind_audition

jiggy2011 13y ago
How would that work outside of music?
- venomsnake 13y ago
  Employers are forbidden from collecting any information about the employees outside of expertise.

chevas 13y ago

FICO is crap. All it does is indicate how well you borrow and pay it back. Your credit score should not be a measure of how well you "do what you say you are going to do" -- which is what it has become. The guy in this article is case-and-point--he had a run of bad luck. There are better ways to measure one's reliability and maybe someone here can disrupt the transunion-equifax-experian trifecta or create a new business out of measuring candidate quality for all kinds of things (rentals, jobs, etc.) that doesn't rely on debt. Even the person who is self-made / cash-only has to contend with this buffoonery.

eldavido 13y ago
Agree 100%. There's a more general notion of conscientiousness [1] that, without evidence, seems the really deep, meaningful thing we should measure. Credit score is crappy because cash-only people won't have it and it's effectively monopolized by three data providers with who-knows-what for commercial/financial incentives. [1] http://en.wikipedia.org/wiki/Big_Five_personality_traits http://en.wikipedia.org/wiki/Big_Five_personality_traits

rquantz 13y ago

Does anyone know if this is a common factor in hiring programmers? I would expect not given the job market, but I havent applied for a job in a few years.

EmmEnnEff 13y ago
I've underwent three credit checks, for the past 3 jobs I took. (Two US-owned Canadian branches, and a Valley megacorp)

csense 13y ago

Companies that deny people jobs based on factors that don't directly affect job performance (credit report, race, whatever) will have their lunch eaten by those who don't. In other words, not hiring Mr. Carpenter represents a missed opportunity for those companies. If an experienced dress shoe salesman normally brings down $25 an hour, but Mr. Carpenter is desperate and willing to work for $20 an hour instead, the company that doesn't care about his credit and hires him anyway can save $5 on their hourly labor costs. In fact, as long as Mr. Cooper is underbidding, it doesn't matter how much he underbids; hiring him is still a win-win situation if he asks for $24.75 an hour. Why does this problem need regulatory solutions when plain old capitalism will do? On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world?

bdcs 13y ago
Because people/companies aren't the rational actors tradition economics makes them out to be. Case in point: low credit scores are uncorrelated or even positively correlated with good job performance (cf. the featured article's citations). Yet regardless, companies still base hiring decisions off of them (in the wrong direction, the data suggests). Mr Carpenter had to go through undue hardship due to ignorance and stereotyping of poor people. In summary, I hope Adam Smith's invisible hand slaps some sense into these companies.
jiggy2011 13y ago
The "invisible hand" often works very slowly. By which time Mr Carpenter has been out of work for 3 years and is no longer the hot property he once was.
- csense 13y ago
  I doubt that shoe salesmanship skills become obsolete anywhere near as fast as web development skills.
learc83 13y ago
>On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world? I think what you're seeing is the effect of credit monitoring agencies marketing departments. Sure over the long term those companies that discriminate based on credit may lose out, but in the short term HR managers are going on the word of Equifax/Transunion/Experian that checking new hire's credit history is beneficial. The history of business is full of stupid trends that aren't supported by the evidence.

onemorepassword 13y ago

I don't endorse doing credit checks on candidates, and it's certainly not something I would ever do myself, but I can testify to the fact that employees with financial problems can be an incredible drain on the company and can have a major negative influence. I do however live in a country with strong social security and healthcare, so financial problems are relatively more often the result of personal issues rather than just bad luck.

jiggy2011 13y ago
How were they drains on the company? Was it just correlation between financial problems and people who were a "drain" or where they continually asking for extra pay or stealing things to pay back debts?
greenyoda 13y ago
"I can testify to the fact that employees with financial problems can be an incredible drain on the company" Most people have problems at some point in their lives that impact their ability to concentrate on their work. An employee could be going through a divorce or other relationship break-up, or have health problems or have family members with health problems. Are employers going to try to dig up this kind of information about potential employees as well? Where does society draw the line? For that matter, I imagine that many employees who have financial problems would make an extra effort to succeed at work, since they really need the income.

zimbatm 13y ago

In the UK, I didn't see another company than Experian doing credit reports. To know your credit report, you have to subscribe to a 30-days-free-then-£14.99-per-month thing. And they ask you for tons of info that they can use to improve their file on you. Every time that a business asks a credit report on you it lowers your score for a while. I'm sure the businesses are also paying to get access to your credit report as well. It seems to be a very lucrative business.

rdl 13y ago

A lot of the reason to run a credit check as part of NACLC is to get a list of addresses and thus to help with the national/local agency checks part of the process. I'd find it hard to care if someone had a $50k medical debt and bankruptcy, particularly if disclosed before it was required, but knowing someone lived in Florida and had outstanding Florida warrants for check kiting and identity theft (sigh; I had this happen!) would be useful, and derived from the credit report. I actually had to pay off some 6 year old disputed $20 collection agency stuff right before I did NACLC myself, just to make it cleaner.