Are credit scores extending the recession?

Have you ever been denied a job, promotion, or insurance because of your credit score? Then you’ll want to read these articles in their entirety- because this is a sneaky, pernicious thing that is happening to our lives. I believe that it is part of the reason we’re still stuck in this horrible depressive recession, and will be, indefinitely.

A bipartisan enemy of the people This is a very insightful post by The Slactivist on how damaging those credit bureaus truly are. His thoughts on the whole ‘partisan’ angle are noteworthy, too.

This is not a partisan issue. Credit scores and their expanding, usurping application in every area of life are not an expression of either liberal or conservative ideas. Neither liberal nor conservative ideology offers reasons to defend this expanding, freedom-restricting practice. Both liberal and conservative ideology offer powerful reasons that this practice should not be allowed to control as much of our economy and our individual lives as it does.

Reigning in the pernicious influence of the credit scoring agencies ought to be near the top of any progressive agenda because it makes life even worse for the poorest, for minorities, for the powerless. And it ought to be near the top of any “tea party” type agenda because if you’re genuinely concerned about “the road to serfdom,” then it would be hard not to notice that for most Americans, most of the time, Equifax, Experian and TransUnion are doing more to promote serfdom than even the worst caricature of the IRS or the EPA.

We did not elect these credit agencies to rule over us. They were not established in our Constitution as a fourth, unchecked branch of government. Yet in our capacities as consumers or merchants, as employees or employers, they exert more influence and restrict our freedom far more than anything done by the mayors or councils of our towns, more than anything done by the governors and legislatures of our states. Most days more even than anything done by the Congress or the president. And while the Congress, president, governors, legislatures, mayors and councils are all — at least theoretically — democratically accountable and legally prevented from abusing their powers, the credit scoring agencies are not. [emphasis mine]

Think about that. A corporate entity- one that is byzantine and inaccessible (try getting an actual person on one of their contact lines and getting something done!) has more power than our elected layers of government. Your Senator can’t use his influence to correct an error on your credit report- and unless he’s on that VIP list, (which he or she probably is), they can’t, either. And it takes extreme effort- and often interaction with an expensive lawyer- to get real corrections done -if you can afford it.

The Prospect’s Amy Traub goes into detail about the devastating effects on people’s employment prospects because of a low credit score:

Companies justify the credit checks by saying they need some way to assess a job applicant’s reliability and character. Credit checks have been aggressively marketed to employers by for-profit credit bureaus to do just that. Yet it’s far from clear that running credit checks benefits employers. The only available rigorous study of employment credit checks concluded that there’s no correlation between credit history and job performance. Even industry representatives admit this. Eric Rosenberg, Director of State Governmental Relations for TransUnion, one of the three major credit reporting agencies, conceded: “…we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”

At the same time, employers may be exposing themselves to unexpected legal liability. African Americans and Hispanics – likely due to a variety of factors like higher poverty and unemployment rates, fewer assets, and a legacy of discrimination, including lending industry practices such as redlining—are disproportionately likely to have low credit scores. That means that excluding job candidates based on credit history disproportionately screens out people of color. The potential for bias is magnified by the fact that there are no accepted metrics for employers to assess a job applicant’s credit report. Decisions are open to individual discretion and inadvertent bias.

No accepted metrics. We’re in a country that measures everything and yet, there are no metrics that truly measure patterns of character versus spending habits. Should ‘character’ even be a factor? It truly is a catch-22 situation. You can’t get a job because your credit score is ‘bad’, and your credit score is ‘bad’ because you can’t get a job. But it does not reflect the reality of the situation. Deadbeats exist at all walks of life, but there is a belief that poor people are deadbeats by default. Mitigating circumstances- like the ones I went through when I was impoverished- do not get a look in. In fact, they are often seen as whiny excuses- so what if your check bounced because they didn’t enter them in order or in error, and you got a raft of overdraft and punitive fees from both your bank, their bank, and the company you tried to pay? So what if that left you over $100 short for your rent payment? Shaddup and take this 300% percent “payday” cash advance loan, and don’t try to weasel out of it and pay it off- because we’ll sneak in a fee that will make you underpay even if you thought you paid if off, and nail you for that. And if you try to call to get an EXACT amount owed, we’ll tell you that isn’t possible. You’ll have to overpay to pay it off, and hope that they’ll send you a check for the remainder- sans more fees for the inconvenience. It took me a decade to groom my credit score to a level that was considered ‘middle class’ after the nasty hit I took. Being responsible- and using a credit counseling service (CCCS) actually did more damage than a bankruptcy would have done- but I took the responsible path to pay back my creditors. But being poor cost me dearly. Poverty is extremely expensive.

The Slactivist agrees:

Credit scores provide a numeric — and therefore authoritative-sounding — pretense for charging poor people more than others are charged. For almost everything: rent, car insurance, auto loans, health insurance, you name it. The indispensable variables for credit scores are income and wealth. An irresponsible wealthy person who skips payments will have a lower score than a responsible wealthy person, and a responsible poor person will have a higher score than an irresponsible poor person — but responsibility, diligence and all those other virtues for which a credit score pretends to be a proxy are simply variables that qualify the core quantity of wealth and income. And that allows the credit scorers and their customers to pretend that poor people aren’t simply people with less wealth and lower income, but that they are all irresponsible, lazy and less moral, less worthy than those with higher “scores” due to greater wealth.[emphasis mine]

Think about that for a moment: the amount of wealth you have automatically makes you more ‘moral’ and ‘worthy’ than your actual character and actions. This is one of the most amazing misinterpretations of character imaginable, but it seems to be part of the cultural fabric- consider those churches that equate wealth with righteousness. If you’re rich, it’s because God loves you. If you’re poor, it’s because you are a miserable sinner, and God is punishing you. Really? In my experience, real wealth comes from two main sources: luck (like being in the pre-boomer generational ‘sweet spot’ as my father was- he started work in ’47 and retired in ’77- the peak years of middle class earning power) and hard work, or overt power-seeking and deliberate competitive avarice – or a combination of these two factors.

The state laws that try to correct this inequity are spotty, and often have loopholes in them that still unfairly attack segments of the population. But there is hope on the horizon:

Stronger legislation is on tap at the federal level, where the Equal Employment for All Act sponsored by Representative Steve Cohen would ban employment-related credit checks except in narrow circumstances, such as positions requiring national security clearance. But with 32 exclusively Democratic co-sponsors, the bill is stuck in the Committee on Financial Services and stands little chance in the Republican-controlled House. [emphasis mine]

Ultimately litigation, like the suit against Kaplan, may have an even greater impact on employer behavior than exemption-riddled state laws. If high-profile employers are forced to pay costly damages for the racially discriminatory impact of screening potential employees’ credit histories, other companies will take notice. The fear of expensive litigation and the attendant public relations fallout may be what it takes to make employers reevaluate hiring practices.

This is something worth studying and taking to your congressman and senator- on both the federal and state levels. Hitting the offenders in the pocketbook- including the obstructive Republicans who are dead-set against doing anything that might benefit the Rest of Us (those of us who are not mega-rich, TrueBeliever™ (white) male, corporations) may be the only way to get this corrected. I sincerely believe that this wretched policy is one of the roadblocks in the path of economic recovery, and sadly, I believe that it is deliberately placed. Regulating and restructuring the credit bureaus, banks, and other entities which are outside the direct purview of the government is necessary if we’re going to recover from this tail-spin and get our country and economic parity back. Educating people on What’s Really Going On is another step to take. Yes, this is a baroque and Byzantine mess- but it can be untangled, and we can get our power back from these greedy, faceless entities. If maintaining the ‘status quo’ becomes costly enough, perhaps they will change.

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