by Tricia
I remember way back when I first started blogging about our debt. I was contacted by a debt company that deals with debt settlement. I asked the gentleman who contacted me flat out…what will happen to my credit score if I did this?
He skirted around the issue a bit, and basically said, “What do you need a credit score for anyway?”
Thinking about it a little bit, maybe he had a point. If you want to avoid debt and obtaining new debt, who cares about your credit score? Go ahead and tank it since you won’t be trying to obtain new credit.
But wait a minute. Some employers pull credit reports on potential employees.
“…most people also don’t know that cellphone companies, landlords, and home insurers often use the scores as part of customer background checks.”
[Via USNews.com]
Somehow, having a good credit score has been linked with having good personal responsibility. Since you have a good score, you are a good person. Of course, I don’t buy that for a minute. A number like that can only tell you so much. But companies outside the financial district are using it to judge you. That upsets me more than a little bit.
I told the gentleman with the debt settlement company that I wasn’t interested. Debt settlement wasn’t an option for me at that point. We are able to pay off our debt, given some time to do it. Now, if we were facing bankruptcy versus going with a debt settlement company…that would have been a different story.
Since it seems like the number of businesses/companies using your credit score as a type of background check is increasing, I wonder what the future will hold for credit scores. I personally hope the importance of credit scores decreases outside of the financial industry.
I think it’s ridiculous that potential employers pull up your credit score. Why is this legal?
On a side note, I’ve actually had two different dates ask me what my credit score was. Not only is dating difficult in California, but buying property appears to be even more brutal. 🙂
I have wonder how low a credit score needs to be before cell phone companies deny you. In most cases, there are ways to avoid the credit checks. For cell phones, use a prepaid service (actually a cheaper alternative for some) or just buy a used phone and sign up with a carrier w/o a contract.
I work for a property management company and we pull credit reports on every applicant for every property. We score our own reports (rather than relying on FICO scores), but I believe many companies just use the scores. The credit reports are a valuable tool in the application process for two reasons. First, we need to make sure that the applicant is financially able to pay the rent. Second, seeing the applicant’s payment patterns tells us whether or not the person is likely to pay us.
I too think in most cases not nesessary to pull a credit report for employment. But having said that I have been looking for a part-time job in customer service, and out of 10 positions I applied for all 10 required a credit check, 5 required a background check. Now this is just to work pt at your local Kohls, Home Depot, I could go on but it is only retail. I am not going to be using the register only stocking shelves. But still required. Go Figure. I guess if something happens such as downsizing and you loose your job, are unable to make your bills on time every time, but continue looking for a job, you are pretty much screwed. I think if this is being used as a judgement, then you should be able to explain at least before they just rule you out. Just my opinion.
Thanks for posting this. You’ve done a really great job of keeping track of your credit score and I’m tyring to follow suit. I wish it weren’t such an important number because the credit reporting agencies are NOT consumer friendly.
Companies don’t use your credit score, they are just looking at your credit reports to make sure your history is clean. It’s basically a financial background check being done in most cases. A company isn’t going to want someone with a lot of negative financial information like collections, liens, judgments, foreclosures, bankruptcy, etc.
You really don’t need to worry about a credit score, it’s the credit report that proves you have good history of being able to pay bills. There is a night and day difference between people who have bad credit and no credit.
As an aside, debt settlement companies are, in my opinion, never an option. A debt settlement agency holds the funds you pay them in an interest bearing account and wait for your creditors to charge off your debt before offering to settle. With bankruptcy, at least you have all debts discharged at once for the same period of 7-10 years. A creditor can charge off your account at any time during the collections process, resulting in an R9 rating that lasts 7-10 years. If you have many different creditors, it could take quite awhile before each charge off completely fell off your report.
Actually, in can make sense for retailers to pull your credit report. Even if you are only stocking shelves you are still in a position to steal from the company. If you have high debt then you might be in a situation where the temptation to steal will be greater.
The nefarious part isn’t that they use the scores, in my opinion, it’s that people don’t know they’re using the scores. I hate that everyone is getting tested every day, and a large segment of the population doesn’t even know about it.
Credit scores may actually begin to decrease in importance as more and more people read Dave Ramseys “Total Money Makeover” book and listen to his radio show. Will the future show this theory to be correct?
Insurance rates are also based on your credit.
I wouldn’t worry so much about what my actual score is – I’d worry more about paying everything on time, keeping revolving debt low, and not applying for credit unless necessary.
Credit monitoring companies are the ones pushing you to watch your score go up and down. More money for them.
I draw hope from the employers and clients I’ve worked with, all of whom are putting less importance on credit scores due primarily to their own experiences with inaccuracies. For my part, the credit bureaus have married me to a former roommate and “shared” responsibility for his loans (because we shared an address, you know) with me, and banks I formerly consulted with had stopped pulling them for account openings, having found no correlation between credit scores and good-customer status. I only hope this anecdotal trend continues!
This is very frightening to me. I have a huge amount of credit card debt, and make payments faithfully, though having been late a few times in the past has pushed up my interest sky high. I would be mortified if a potential employer saw my credit report. The idea that I might not get even a part-time job at a store stocking shelves because of my debt is paralyzing. I made the mistake of thinking I could handle payments and keep my personal finances private, years ago when I first stared using credit cards. I never dreamed that I wouldn’t be able to dig my way out. My fault for being short-sighted. Does anyone know if this is par for the course, or if it is only some types of employers who look at your credit record? Can you find out beforehand that they are going to do it–do they indicate they are going to do it on employment applications?