Credit Scores

foxfeathers

This question is for all the bankers--for employment, how do you handle credit scores on prospective employees? Is the score part of your overall information on the candidate or is the score a determining factor? We pull credit scores on all prospects as a final qualification and determing factor and there has been a lot of discussion about this process. I know aobut bankruptcy and how that is supposed to be treated as far as employment and I do get the prospects to sign a sepaarate form and give them a copy of the Fair Credit Reporting Act.

I just would like to compare processes with other HR folks as to how you use credit scores or if you do.

cthr

We do not pull credit as part of the background check. A person's credit score/report is not relevant to their ability to do the job. All of our employees are bonded and we run a state and federal criminal background check as well as a SS verification. We have decided not to pull credit as there is no proof that someone who has poor credit is unable to perform the necessary functions of the job. And yes we are a financial institution.

Don D

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**When we do for others what they should do for themselves, we disempower them.**

foxfeathers

Let me give everyine a little more background that might explain the situation I'm in. We are a small bank and I am the first HR Officer the bank has had. My background is in the telecommunications industry in another state and I have very different ideas about HR policies than the powers that be and guess who ends up losing the argument. I know that bad things happen to good people and it does not affect their work ethic or their ability to do their job. On the other side of the argument, I'm told
that the stress of financial burdens can be too tempting to some people who are handling money and that the bank should not have an employee who they wouldn't loan money to. And so the argument goes!

mwild31

Foxfeather - I feel for you. It's tough dealing with idiots - especially if they sign your paycheck.

I just bought a house recently, so I'm one of those weird folks (I think it's weird, because a lot of folks I chat with don't seem to know theirs) that actually knows my credit score. Right after buying my house, do you know that my credit score dropped 21 points? Apparently it had to deal with taking a lot of credit out (mortgage) & no payments had as of yet shown up. Fortunately, I just recently looked it up & it went up 12 points from what it was when I was first "pre-approved" for the home loan. Good news, but if you consider how it dipped, then you could say it went up 33 points in about 5 months. Geez, I wonder what would have happened if I had been applying for a job at that time? Sure, I could probably explain it away, but there are so many factors involved with the score - to consider it in regards to hiring someone seems pretty silly. First and foremost, the score changes over time as it's really only a "snapshot" at the point in time it was requested - 5 months ago it could have been higher or lower. Also, the score is made up of:

35% Payment history
15% Length of Credit History
10% New Credit
10% Types of Credit used
30% Amounts Owed

So, my question is: how do you know if the reason the score is low is due to the amount that's owed or their payment history or a combo of length of credit history/new credit sought or the types of credit used? The answer is, you don't. Take the reverse, you hire someone & check their history 5 months from now & it goes down - fire them?

Criminal background checks, yes, do them. Pull a credit report, okay, if you have to. Base hiring decisions on a "snap shot" credit score - no way.

ps - my info can be found at this website:

[url]http://www.myfico.com/myfico/CreditCentral.asp?fire=1[/url]

National Guard

By their logic one would conclude that only Rich people are honest! and the only reason one would have bad credit is because they are dishonest.

pork1

Another important point is that credit reports do not always hold the truth. I was and still am the victim of ID thief; it is happening more and more. I once had to write a check for $318.00 to get a bad report off my record so that I could buy a home.

No we are not a banking institution, but bonding is the best course of action. At one point I had $43,000.00 worth of bad debt and I never knew until I had the FBI call me on a charge. Needless to say I went to work on the situation and was blown away with what was allowed to be charged against my name and social security number, followed by the business world logging onto the credit bureaus with bad credit information.

Sorry for using your post to vent, but it still hurts!

PORK

Don D

When I refinanced my mortgage, I learned that my score was affected by the number of credit cards I had with limits that had not been reached. For example, I may have a $300 debt on a card that I pay each month and it has a limit of $11,000. They use that to my disadvantage as if I might charge up all that crap tomorrow night at Home Depot and run off to california with a pickup full of buzz saws and plywood. I still say the goal of all of us should be to get a double wide, deep in the woods, with a front porch big enough for a grill and a back porch big enough for a washboard, a 22 rifle and a sack of shells with an old truck workable enough to make it to town bi-weekly to get some grub and stuff. And go into town once a year to the picture show.





**When we do for others what they should do for themselves, we disempower them.**

irenesmsaclaims

They also use it against you if you are up to the limit on a credit card. Hard to win.
Borrow money to put children through college? You're the same loser with a judgement against him or her for driving without car insurance. The credit agencies, with all their inefficiencies have alot of power in our lives. The reports I request have so many errors that it's overwhelming! My daughter is my spouse, numerous permutations of my address and employment, I don't know where to begin to correct this stuff.
There was another thread about this. I think I got flamed by one person when I said that being in financial difficulty does not make a dishonest person out of an honest one. Naive, I guess.

Cheryl S SPHR

I am the HR person in a bank as well. First, I would say you need to familiarize yourself with the Fair Credit Reporting Act (FCRA). If you have a compliance officer, he/she may be able to help you. Employer reports should not contain a credit score -- they are different than the reports you run for credit purposes. They are typically called "peer" reports and contain somewhat different information -- no credit scores and the applicants FCRA rights are included right in the report. We run a credit, criminal history, OFAC, etc. on our final candidate. We do take into consideration what caused the credit issues if a person has bad credit. We also consider what job we may be hiring them for. There is no hard and fast rule on when to hire or not based on credit. There are very specific notices you have to give an applicant if you make a decision not to hire based in whole or in part on credit.

The bottom line is do your homework and then you will be in a better position to advise your bank management on what they should do to comply with the act and protect the bank (balance!).

Good luck...

hrbanker

I'm in agreement with Cheryl S. We get a PEER report that does not list credit score, age or other personal information that we are not allowed to consider before hire.

If someone I want to hire has bad credit, I call them and ask... why is this on your credit report? I actually had one lady tell me she moved from West Virginia to Ohio, so she didn't have to pay the utility bills from WV that were listed as collection items on her report. Yes, they were here bills, but she felt no obligation to pay them...

You can get a lot of insight into the integrity of the individual.

HR in PA

I also pull "peer" reports. In addition to other reasons stated for pulling the peer report vs. the entire credit report, it also does not appear as a "hit" for the applicant. Being that we are a financial institution, it could appear as if they were seeking an extension of credit/loan from our organization vs. employment. The peer report shows that the inquiry was for employment purposes. As others have stated, we ask questions in the event of questionable or spotty payment history. However, we also have a similar philosophy as your management team and it has worked well for us. Good Luck and as previous advice has stated, study the FCRA as there are specific things that must be supplied in the event that the credit history prevents you from hiring an individual and the sign off required informing the applicant of their rights.