New settlement documents have been mailed in the White, et at v Experian Information Solutions class action case.  The class action, which also includes TransUnion and Equifax as defendants, was filed over 4 years ago in Federal Court in the Central District of California.  The plaintiffs, all whom filed a chapter 7 bankruptcy, allege that their credit files still showed debts that predated the filing date of their chapter 7.  These debts, if statutorily discharge-able, should be shown as having a $0 balance since they were canceled by the bankruptcy.

Settlement was reached in the case in 2009 and award documentation was sent to the members of the class, which numbered in the millions.  If you submitted a claim for an award you recently (or will soon) receive another document asking for additional information about your claim.

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One of the hardest things for lawmakers to do is to make everyone happy.  I’ll be the first to acknowledge that the prospect of uniform harmony in Congress is a pipe dream.  The CARD Act (Credit Card Accountability, Responsibility, and Disclosure Act of 2009) is a great example of how a law meant to protect and please consumers is likely to do the exact opposite.

The Act, among other things, restricts the issuance of credit cards to anyone who doesn’t have an income.  The goal is to keep people out of credit card debt if they can’t afford to pay it, which makes sense.  However, the metric of “income” or “the ability to pay” is taken at the individual consumer level, rather than at the household level.

What this means is anyone who is a stay-at-home mother, or father, and has no verifiable income won’t be able to qualify for any sort of credit card account.  They’ll have to either use an existing credit card, get a job, or get a co-signer.  The problem with the “individual income” requirement is that many consumers make a choice to NOT have a job so they can spend their full time raising children or otherwise managing a household.

In most cases stay-at-home mothers and fathers have a working spouse.  This means the household does, in fact, have an income and the non-working spouse has access to said income.  However, the CARD Act income requirement does NOT allow for the household income to be a consideration.  This seems to be shortsighted considering how many people are out shopping during normal business hours and engaging in commerce, presumably because they have a working spouse.

Another group this stands to hurt is the army of retailers who target women with products and services.  The next time you walk through a mall, any mall, take an informal visual survey of the distribution of stores that target women versus those that target men.  You’ll quickly realize that it’s disproportionate toward women.

A great number of these retailers has a financial services partner that issues retail store credit cards for the chain.  With the CARD Act the number of women who can take advantage of in-store credit offers will be significantly reduced.  That means no new card, no same day shopping discount, and perhaps worst of all, lost sales and revenue for the retailer.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, and the credit contributor for Mint.com.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.

One of the most objectionable uses of credit reports is their use by employers for pre-employment and continued employment screening of job applicants and current employees.  It’s especially controversial if protected classes are disparately impacted by the practice.  And while no hard evidence exists that proves there is a disparate impact, the Equal Employment Opportunity Commission just sued Kaplan Higher Education Corporation for alleged discriminatory use of credit reports for hiring purposes.

The lawsuit alleges “an unlawful discriminatory impact” on African American applicants.  And while Federal law (The Fair Credit Reporting Act) still allows the practice of using credit reports for employment screening, the hiring company cannot use credit reports to disqualify groups of people, regardless of intent.  It’s important to note that employers do not use credit scores and I wrote about this credit scoring myth here.

The EEOC’s lawsuit, while in its infancy, begs several questions about the practice of using credit reports for employment screening.  They are…

• Does every employer screen their applicants’ credit reports?
• Are the rules governing the use of credit reports by employers different than those that govern their use by lenders?
• What exactly are employers looking for on credit reports?
• How can job applicants overcome credit barriers?

Not all employers use credit reports for employment screening and those that do don’t screen credit reports for all of their applicants.  The practice seems to be reserved for positions that either require access to money or sensitive information, but that isn’t exhaustive of all situations where credit screening is used.  They’re looking for signs of irresponsibility, which can be gleaned by the amount of delinquent debt on your credit reports.  And finally, outstanding judgments can also be problematic because of the possibility that they’ll become garnishments and unwillingly drag your employer into your debt situation.

The rule governing the use of credit reports for employment screening do differ than the rules governing their use in lending.  First off, the employer must get your express and overt permission before access your credit files.  The same type of permission is not required by lenders as long as they have a reason to believe you’re asking for some sort of credit benefit.  For example, when was the last time you signed any sort of credit application when you asked for a credit limit increase or applied for a public utility?

Additionally, if you have public records on your credit report that fact must be disclosed to you proactively.  When you apply for a loan with a bank or insurance with an insurance company they don’t have to tell you what’s on your credit reports.  Also, the inquiry posted on your credit report when you apply for a loan is viewable by other lenders.  When you apply for a job the employment inquiry cannot be seen by anyone other than you.

It’s rare that employers are so bold as to publicly disclose their policies with respect to their credit screening “breaking point.”  There is also no industry wide standard set of policies regarding how bad your credit has to be before it will cost you a job.  This is why nobody knows “the rules” going in to the interview process.  And, it’s also why nobody knows the right way to handle the impending “credit problems” discussion.

There are some who believe you should not give the employer permission to pull credit if you have something to hide.  The problem with that strategy is that, well, you look like you have something to hide.  And with dozens of applicants for every job opening it’s easy to move on to the next resume.

I think the better tactic would be to get deep into the interview process and, when credit comes up, overtly disclose any issues that are plaguing your credit reports and offer an explanation. You won’t have the opportunity to offer an explanation after you’ve been disqualified, and even if you are it’ll likely be futile at that point.  At least this way you are controlling the conversation as best you can.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, and the credit contributor for Mint.com.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.

Credit scores used for employment screening?  I’ve called it the myth of the decade for many years.  Why…because it doesn’t happen.  Employers don’t use credit scores to screen potential employees.  They can use credit REPORTS, in most states, but not SCORES.

You can tell I get a little excitable about this topic.  I’ve been arguing with people who “know it happens” since my early days at FICO in the late 1990’s.  The minute I ask them to show me an example, any example, of an employer who pulled a credit score for employment screening the conversation ends.  Why?  Because there has never been a verifiable example of an employer asking for, receiving, and/or using a FICO risk score for the purposes of screening an employee or prospective employee.  It’s like the Loch Ness Monster…a lot of people have seen it…but really nobody has ever seen it.

I don’t blame people for thinking it happens.  WE can’t even get it right.  When I say “we” I mean people who work in the credit and media industries.  WE keep telling people, incorrectly, that scores are used for employment screening.  WE keep getting it wrong!  WE caused the problem and WE cause the myth to persist.

Greg Fisher from CreditScoring.com put together a very entertaining and eye opening collage of clips from websites, television ads, and interviews that show just how wrong so many people get this.  Take a look at this collage and you’ll see reputable people, even some who work for key industry players, getting it flat out wrong.

The primary reason why, in my mind, this has become such a prevalent myth is because so many people believe credit reports and credit scores are one in the same.  The reality is credit scores are not credit reports and credit reports are not credit scores.  Credit scores are a product sold along with credit reports to lenders and insurance companies.  The credit bureaus can control the distribution of scores, which means they can prevent them from being sold to employers.  Think of it this way…your credit report is the steak and your FICO score is the cheesecake.  They’re both part of a great “dinner”, but they certainly aren’t the same thing.

All three of the credit reporting agencies has gone on record, over and over and over, stating that they do not provide credit scores with credit reports to employers.  They’ll tell this to anyone who is willing to listen to them.  Further, the Consumer Data Industry Association, the trade organization of the credit bureaus, has also stated the same thing over and over.  So, the next time you hear, read, watch or listen to someone claiming that scores are used by employers, you’ll know better.  And maybe, just maybe, you can help me out by letting them know they’re getting it wrong.  Otherwise I’ll be hearing about credit scores and employment for the rest of my career.

John Ulzheimer, who was not hired by SmartCredit because of his credit score, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and the author of the “credit rating” definition on Wikipedia.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.

Your credit score may be a mystery to you, even if you are aware how important it is in your life.  Your credit report and credit score matter more than you think and for more than just getting credit.

Your credit report is a history of all your credit activities.  It will contain your name, address, social security number, date or birth, your employer, your phone number, a list of those who have looked at your credit and everything positive or negative about your credit accounts.

This information is very sensitive and private.  Only those with your express permission or legal need are allowed to view your credit report.

It is your credit report that determines your credit score.  Your credit score is a number between 350 to 850, bad to great.  There are different credit scores which may use a range of 500 to 999.  However, most credit granting decisions are made with the FICO credit score which ranges between 300 to 850.  Your credit score number helps those viewing your credit report understand a lot about you.

Your credit is used not only to help creditors decide whether or not to grant you credit, but can be used as a form of identification, determine your insurance rates and guide employers on hiring, firing and promotion decisions.

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An Employment Credit Score is a pioneering concept from Smart Credit.  It is a score for individuals to understand how employers may judge them based upon their credit report.

Because your credit report is being used by 50% of employers to determine hiring, firing or promotion we felt it was important to create a new score that considered factors an employer may use.

Our Employment Score is determined by your credit report.  It weighs certain factors more, or less, depending on how an employer may look at your credit report.  Remember, employers cannot see your credit score.  This means factors on your credit report are manually reviewed and determined differently for a job or promotion than for a loan or line of credit, which is almost exclusive credit score based.

Your Employment Score range is between 350 and 850:

The Employment Score is calculated from lots of different credit data in your credit report. The percentages below reflect how important each category is to your Employment Score.

As you can see, the last 12 months is very important to an employer.  Paying your bills on time, low financial stress and avoiding tax liens or collection accounts demonstrates good healthy behavior on your part.  This is important to employers who are looking to judge your character.

Compare that to how standard credit scores are calculated, including the FICO credit score:

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How your credit can get you hired, fired and stop a promotion. Part iv of iv: Getting fired because your credit changes during employment.

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As we have learned in part iii, the job applicant’s death spiral, your credit can derail your prospects for a job or promotion.

Now we’ll explore how your credit can possibly get you fired.

Checking credit during employment is a new trend. Employers have started using your credit to monitor on-going behavior while you are employed.  Many employment contracts now include your permission to check your credit twice a year or whenever determined necessary.

The need for this does have relevance if you have a sensitive job, high security clearance or handle the identity of others.

Why is checking an employees credit a growing habit beyond the obvious need?

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How your credit can get you hired, fired, and even stop a promotion. Part iii of iv: The job applicant’s death spiral.

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It starts with someone who is unemployed and searching for a job. Then, one of the two following factors is needed to create a job applicant’s death spiral:

1) Your credit is negatively affected by errors or identity theft; or,

2) You have used up your savings and can’t pay your bills on time, negatively affecting your credit.
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How your credit can get you hired, fired, and even stop a promotion. Part ii of iv: Why your credit report can stop you from getting the job or promotion.

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To understand why bad credit can stop you from getting a job or promotion, let’s first understand that good or great credit will only bring you to neutral in an employers hiring decision.

In part i, we learned most employers are not qualified to review your credit report.  Additionally, most do not know the difference between good or great credit by looking at a credit report, which has no negatives items (remember: employers cannot see your credit score, only your credit report).  It is true that good or great credit will give you an advantage over other applicants with bad credit.  On the other hand, do not count on good or great credit to be anything more than judging you as one with normal credit.

To help you prepare for an interview, let’s examine how employers interpret your credit report.  If necessary, review part i again, to see what employers are looking for on your credit report.

If the employer interprets your credit report as Below Normal or worse, your chances of getting the job or promotion become slim.

What can you do?

Understand your credit well and be prepared for an interview.  Part of being prepared is making sure your credit is the best it should be.  Be proactive and use SmartCredit.com Our Smart Action buttons work quickly to fix errors, get goodwill corrections of negatives and settle debts to help your overall credit.

Coming soon:

Part iii – The job applicants’ death spiral.

Part iv – Getting fired because your credit changes during employment.

David B. Coulter – founder and C.E.O. of Smart Credit

How your credit can get you hired, fired, and even stop a promotion. Part i of iv: Why employers check your credit report.

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You may be shocked to learn that your credit is playing an ever increasing role in employment.  Your credit report is used, in part, to determine if you are worth hiring.

In many cases, when you apply for a job, you are agreeing to a background check which includes your credit report.  The Fair Credit Reporting Act allows employers to do this.

This is a recent trend.  It got traction in 2001 and now nearly 50% of employers are using credit report data to help determine who they should hire or promote.

Why would your credit report matter to a potential employer if you have the talent, education and experience for the job position?

It’s because the resume is too easy to fake and too hard to verify.  Additionally, checking references and specific items on your resume may take too long and cost too much.  Something else needs close attention and there is little else beyond your resume, criminal background check and your credit report.

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