Before Mike headed over to guest-blog The Baseline Scenario for a week (notice how he started taking RortyBomb seriously about 6 months ago and is already 1000 times more popular / better at blogging than me? I have a feeling I'm going to be able to say I know a lot of famous people in 20 years from my commanding perch in obscurity.) he noted that we as a society are standing on the brink of employers utilizing credit checks in hiring decisions. In other words, you're unemployed. Your credit goes to shit. Potential employers start turning you away because your poor credit indicates "poor judgment." I can't wrap my head around the number of levels on which this is fucked up.

First, the vicious cycle of unemployment-to-bad-credit-to-unemployment is not hard to spot. You get canned and end up living off your credit cards and/or filing bankruptcy. When employers use that as a reason to deny you a paycheck, you live off more credit and leave a vapor trail on your way to bankruptcy court. Second, to put on our social scientist hats for a moment, they appear to use Credit Score as a proxy for an unobserved/latent variable (judgment). But is there any logical basis for doing so? To the extent that the individual's judgment is an independent variable it is highly collinear with other vague ("the housing market", "the economy") or unmeasurable (life circumstances, etc.) variables. Frankly, a standardized test for applicants would do more to shed light on decision-making skills. So might throwing darts at a board, for that matter.

Finally, have we bought into social darwinism so completely that we're going to start branding debtors with a scarlet letter – or perhaps we can tattoo their Equifax score on their foreheads – to mark them as undesirables? Of course we have. We're more than comfortable using debt as a form of social control and class stratification in this country. Consider the mid-nineties explosion of the "Intern Economy" in which employers started insisting that college graduates have internships to make their resumes "stand out." What does this accomplish? Does a summer or a year of fetching coffee and making copies really make someone more qualified for a job? No, but it does thin from the applicant pool any college kids whose parents lack the means (or the willingness) to support them while they work for free in New York, DC, or some other disproportionately expensive and happening place. Scanning credit scores, which will simply identify people who have no personal financial safety net, is the logical next step and a legally permissible alternative to writing "Sons of management only, please" in the job ads.

Sure, this process will catch the morons who took $450,000 mortgages on a $40,000/yr salary or who routinely run up their Mastercards and file bankruptcy. In other words, it will catch the straw man debtor who lives in John Boehner's head. It will catch them even though they are a minority of people with poor credit. It will also catch a lot of people with excellent "judgment" who have gotten screwed. It's like fishing for tuna with depth charges. Sure, you'll get your tuna, and I guess you can ignore all of the other carcasses that float up alongside it.

(PS: This is my favorite post title ever. Out of 1200 and counting.)

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15 thoughts on “THE SCARLET DEBTOR”

  • Just as being a divorcee used to be a deal breaker, I think (hope) the credit check trend will fade fast when they realize reliable people can have good reasons for financial failure.

    My insurance jobs have always required credit checks (that's fifteen years, for what it's worth) and it was because insurance companies are financial institutions that required me to be bonded as well as licensed. The requirement has eased up in the past five years, probably due to the huge increase in bankruptcies. A good sign?

    Excellent title, too, not that you need my endorsement.

  • This already happens, especially for minimum wage retail positions. That's why I can't ever get a call back let alone an interview to places like Borders or Best Buy, but I can get a job teaching band or music at a school. Borders and Best Buy run my credit and immediately dismiss me when they see it (and it isn't even that bad!! Damn student loans.) while the schools look at my work history and resume and actually interview me. Could have used that Borders job this summer, and I think they still have a "Now Hiring" sign up in their window.

    I would think that someone with bad credit would be in greater need of a job and therefore more likely to keep it and be reliable as opposed to Jack "My parents pay for everything but require me to have a job to learn responsibility" Freshman who might show up late or not at all. But as I've discovered in the past year or so, the system doesn't always (ever?) make sense.

  • This is really part of one of the larger problems of modern American society: the US populace, in general, is quite happy to be a corporate slave. It doesn't bother the average Joe that The Company tries to own him from head to toe.

    Take, for example, the IT field. And not just server management, but even software development in general. The companies love to get their employees company phones, and most employees go "Hey, free phone!". What they don't realize is that the purpose of the phone is not a gift — it's so that the company can find them 24/7 and demand they put in time above and beyond their normal obligations. While I don't advocate riding the clock by any means, the fact is that after 40 hours a week, the company has had its share of my time, and it is not getting any more without substantial bonuses involved.

    Then there's the idea of companies trawling Spacebook/MyFace and other social networking sites to get the dirt on their employees. While I certainly think that people that call in sick from work and then post party photos on myspace are incredibly stupid and need to be punished, I also remember well the Nintendo employee that got fired because of her blog that simply expressed her negative opinion on recent company products.

    We live in an age where corporations believe they have a right to access all of an employee's personal data. Where The Company feels it should have the ability to monitor every aspect of your life and ensure it all conforms to the Corporate image. As campy and dated as Cyberpunk stories may seem these days, the fact of the matter is that — sans the neato cybernetics — we are closer to them than ever before. The Corporations may not be overtly world-controlling just yet, but they most certainly are trying to assert themselves as pervasive, life-controlling entities, and the phrase "Company Man" is becoming more and more of a relevant spectre.

    The true tragedy of the United States is that its people are willing to denounce a publicly-accountable government from controlling their lives, so that they can more freely submit to a non-accountable private entity controlling their lives.

  • When I originally appplied for my current job, I was informed I'd have criminal/credit/etc. checks done on me. I immediately told the hiring manager that they'd find a lousy credit rating and why. They more than appreciated my candor and reasons for the problem (I'd been made redundant from a previous job after 17 years). Hired!

    I love the post title also. It reminded me of a friend who used to call herself "The Scarlet Renter."

  • Ed – I think this is a great post and I see myself nodding in agreement as I go through – especially where it seems credit scores are being used to automatically dismiss applicants… right up until you start use 'a lot' and 'minority.'

    As someone who had bad credit coming out of college, I can assure you it was because of poor judgement – 'why yes, I do need that mastercard because the hot young woman hawking them in the student union gave me a second look.' It took – and still take – hard work, will power and a willingness to put aside uneccesary purchases.

    It's also important to look at the difference between credit scores and credit reports. The score is a snap shot and I agree it would be a deficient tool for assessing someone's judgement. I am sure this will come back to bite the asses of lazy corporate HR hacks or overally zealous risk management consultants when they realize good candidates are going to work somewhere else.

    On the other hand, the credit score looks at the totality of a person's relationship with their creditors. If Joe Blow has had a regular employment history, 15 credit cards maxed out, isn't making regular payments and has a couple of judgements filed against him I would ask questions about his judgement as well.

    I'm not saying it makes him unemployable or a bad person unworthy of employment. But if I had two equally qualified candidates and one was Joe Blow and the other had a report that showed problems related to medical bills, student loans or some other financial crisis I can see how it could be used as a way to differentiate between two candidates.

  • If I recall correctly, Ford (may He be in his Flivver forever) used to inspect the company-supplied housing for signs of drinking or other 'unacceptable' behaviour. Just to point out that this has been going on a looong time.

    I too have worked in finance for the last decade. I assumed that all employers did credit checks for the last few years, and good ones would tell you. Maybe even give you a chance to explain any 'blips'. But yes, many, many places use it as a lazy form of HR- IF CredScore>x, THEN subReject(). And let us not forget that Equifax, et. al. never take responsibility for the quality of the data they present, it is 'the other guy', 'we just report what we are told' (to tie in with your last post Ed). How many people have a tale of some extraneous credit line showing up on their score?

    Ahh, this used up all the caffeine in my system, time to recharge.

  • I'm pretty paranoid about the Evils of Corporate Elitism and also extremely liberal, but I have a hard time believing this will stick like the Intern Economy did/does.

    First, it's extremely easy to pass a bill (or, heck, an exectuve order) to ammend EEO to prevents credit checks from being used to reject employees. I'm pretty sure there are even Republicans that would vote for that. Secondly, as you pointed out, it's basically useless except as a way to establish aristocracy. And I think there are better ways to do that, even for the wannabe aristocrats.

    I see this as a bit of a temporary sideshow. It's particularly bad now because unemployment is so bad. But I just don't see it sticking.

    The Intern Economy, though. It's only getting worse. Also see it's redheaded stepbrother, the Perpetual Contract Worker Economy.

  • I've noticed this attitude in spades in Republican circles. The idea seems to be that if you're stupid enough not to be born into a wealthy family, then fuck you. If you're not smart enough to be able to afford health insurance then why should we help you out? Why should the government help those who are too lazy to be born to rich parents?

    We're far beyond the point where there ought to (by all rights) be mobs with pitchforks taking the rich from their homes and bringing them to visit the gillotine.

    Thank goodness for American Idol, I guess.

  • I thought it was bad losing a job for which I was overqualified because of a personality test. But this is a thousand times more evil/worse.

  • oldfatherwilliam says:

    The issue at issue here has been an issue for at least 50 years to my knowledge. Credit reports are used by employers and bonding companies to determine whether other companies have found us to be righteous and "trustworthy", suspecting that their experience with us may be similar. Companies are far more alike in this and other respects than we are as individuals, to make an obvious point. To Parthenon, those P tests are an attempt to place an "objective" barrier between applicant and interviewer's take on her. The true truth, though, is that the subjective will override. No-one hires unless they can see some aspect of themselves in her.

  • as a person who has hired and fired many individuals over the years for nearly as many reasons, i don't see how a person's poor personal financial judgment and decisions affects his/her ability to create logos, build websites, repair automobiles, maintain HVAC units, provide nursing care, assemble toys, operate heavy equipment or factory assembly line machinery, or do any other task required at a job that is not financial in nature. why are they REALLY doing credit checks? to determine if you might steal from the supply closet? to help decide if you might lie about completing a task? seriously, this is absurd. then again, life often is, isn't it?

  • I thin it's the same reason they do drug testing. Because they can coupled with a heaping helping of you need to know who's the boss, peon

  • Isn't it funny that a lot of Republicans are viscerally opposed to scientific Darwinism — grandpa warn't no monkey, and Jesus rode on dinosaurs — but they blissfully subscribe to a thinly disguised version of social Darwinism, in which the supposedly virtuous get to reap all the rewards while the "lazy" become condemned to slow extinction.

    Of course, it's not Darwin's fault, nor does it really originate with him. I suspect it should be blamed on that motherfucker Jean Calvin, the true founding daddy of White America.

  • Aslan Maskhadov says:

    Kudos Bill for bringing up drug testing. I never understood how incredibly screwed up drug testing is until I got out of the US, where I started finding out that it is almost unheardof outside of the bizarre USA. It is occasionally used in some countries for potentially dangerous jobs, but they don't have the American "you're hired as long as you pass this test" system. Why are drug tests fucked up? Let me count the ways:

    1. The logic is ridiculous. You can smoke one joint, and it will pop positive up to a month later. Does this qualify you as a drug addict? Every night you can get blitzed on alcohol and so long as you come in sober they don't give a damn. But god forbid you get high one weekend in the privacy of your own home.

    2. Drug tests are mandatory for workman's comp claims- which seems pretty intelligent unless you consider a personal anecdote I had where I pulled a major muscle in my back just sitting in my truck when I twisted around to grab some papers on the passener seat. The muscle was torn, and I had to take a drug test just to make sure that this event was not somehow connected to illegal substances.

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