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pre-employment credit screenings perpetuate the ‘poverty trap’
#1
Credit checks during the hiring process can exacerbate already tenuous financial situations.

Credit screenings are a common part of the hiring process. Nearly one in three employers will perform one on a job candidate during the hiring process, according to a 2016 study from job search site CareerBuilder. From the employers’ point of view, it is preferable to hire someone with good credit because that is an indicator of their productivity. But a new working paper from researchers at the University of Wisconsin, Madison, and the University of Texas at Austin demonstrates how this standard can hurt low-income Americans.

The use of pre-employment credit checks leads to a “poverty trap” in which an unemployed worker with poor credit has more difficulty finding a job. That causes them to go longer without a steady stream of income, which in turn makes it more difficult to pay off their debts. Consequently, their credit gets even worse. Overall, this poverty trap is associated with a 2.3% wage loss per month over a 10-year span, according to the working paper, which was distributed Monday by the National Bureau of Economic Research.

This echoes previous research from progressive policy group DEMOS, which found that 10% of people living in low-to-medium-income households were denied a job because of bad credit.

https://www.marketwatch.com/story/the-fi...teid=nwhpf
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#2
But having bad credit is a pretty reliable indicator of an unreliable employee. Hiring unreliable people adds stress to coworkers, hurts the company financially, and can ultimately impact the salaries and security of other employees.
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#3
(09-17-2018, 12:06 PM)mason Wrote: But having bad credit is a pretty reliable indicator of an unreliable employee. Hiring unreliable people adds stress to coworkers, hurts the company financially, and can ultimately impact the salaries and security of other employees.

Give a scientific study or two showing that bad credit is a pretty reliable indicator of an unreliable employee.

I could maybe understand that having a bad credit rating in very good times is a reliable indicator of an unreliable employee, but a bad credit rating in bad times would appear to be meaningless and more of an indicator of bad luck.
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#4
(09-17-2018, 01:27 PM)ModestProposals Wrote:
(09-17-2018, 12:06 PM)mason Wrote: But having bad credit is a pretty reliable indicator of an unreliable employee. Hiring unreliable people adds stress to coworkers, hurts the company financially, and can ultimately impact the salaries and security of other employees.

Give a scientific study or two showing that bad credit is a pretty reliable indicator of an unreliable employee.

I could maybe understand that having a bad credit rating in very good times is a reliable indicator of an unreliable employee, but a bad credit rating in bad times would appear to be meaningless and more of an indicator of bad luck.

You mean a statistical study? I don't consider those scientific. Either way, no such study would ever be funded, and if it were no credible (PC) journal would publish the results. However, there are plenty of studies that conclude bad credit (a.k.a. bad financial decisions) is correlated with risky behavior or bad judgement. Here are a few at random:

https://www.sciencedirect.com/science/ar...1316300997
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5641572/
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5285332/
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#5
(09-17-2018, 04:16 PM)mason Wrote:
(09-17-2018, 01:27 PM)ModestProposals Wrote:
(09-17-2018, 12:06 PM)mason Wrote: But having bad credit is a pretty reliable indicator of an unreliable employee. Hiring unreliable people adds stress to coworkers, hurts the company financially, and can ultimately impact the salaries and security of other employees.

Give a scientific study or two showing that bad credit is a pretty reliable indicator of an unreliable employee.

I could maybe understand that having a bad credit rating in very good times is a reliable indicator of an unreliable employee, but a bad credit rating in bad times would appear to be meaningless and more of an indicator of bad luck.

You mean a statistical study? I don't consider those scientific. Either way, no such study would ever be funded, and if it were no credible (PC) journal would publish the results. However, there are plenty of studies that conclude bad credit (a.k.a. bad financial decisions) is correlated with risky behavior or bad judgement. Here are a few at random:

https://www.sciencedirect.com/science/ar...1316300997
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5641572/
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5285332/

Mason, did you read those 3 papers?  They say nothing about credit scores, good or bad, being correlated with risky behavior or bad judgment.

In reality, all a credit score indicates is whether or not you have the money to pay your bills.  Thus I  would wager that bad credit scores are really correlated with poverty.
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#6
(09-18-2018, 08:31 AM)ModestProposals Wrote:
(09-17-2018, 04:16 PM)mason Wrote:
(09-17-2018, 01:27 PM)ModestProposals Wrote:
(09-17-2018, 12:06 PM)mason Wrote: But having bad credit is a pretty reliable indicator of an unreliable employee. Hiring unreliable people adds stress to coworkers, hurts the company financially, and can ultimately impact the salaries and security of other employees.

Give a scientific study or two showing that bad credit is a pretty reliable indicator of an unreliable employee.

I could maybe understand that having a bad credit rating in very good times is a reliable indicator of an unreliable employee, but a bad credit rating in bad times would appear to be meaningless and more of an indicator of bad luck.

You mean a statistical study? I don't consider those scientific. Either way, no such study would ever be funded, and if it were no credible (PC) journal would publish the results. However, there are plenty of studies that conclude bad credit (a.k.a. bad financial decisions) is correlated with risky behavior or bad judgement. Here are a few at random:

https://www.sciencedirect.com/science/ar...1316300997
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5641572/
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5285332/

Mason, did you read those 3 papers?  They say nothing about credit scores, good or bad, being correlated with risky behavior or bad judgment.

In reality, all a credit score indicates is whether or not you have the money to pay your bills.  Thus I  would wager that bad credit scores are really correlated with poverty.

As I said before using credit scores as an indicator in a study is not something likely to ever be funded or published. But those papers said plenty about making bad financial decisions. Getting a bad credit score is a fair measure of that, and while there are exceptions and outliers companies do still hire people with bad scores. It is similar to checking someone's social media postings to determine if they have a history of poor behavior, except with credit scores you can ask them to explain what happened during an interview.

And I disagree that a credit score determines only if you have the money to pay your bills. People who have the money often choose to do something else with that money. Those same people will often wake up tired and choose to call in sick then go back to sleep. They may choose to spend their money on non-essentials while neglecting car maintenance. The list is endless.

Finally, I find it strange you would discount the statistical nature of credit checks while asking for statistical studies to prove you wrong. I agree low credit scores are correlated with poverty, then again so are risky behavior and poor judgement. An employer is responsible for protecting the company as well as the existing employees from potentially harmful new employees.
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#7
(09-18-2018, 01:02 PM)mason Wrote:
(09-18-2018, 08:31 AM)ModestProposals Wrote:
(09-17-2018, 04:16 PM)mason Wrote:
(09-17-2018, 01:27 PM)ModestProposals Wrote:
(09-17-2018, 12:06 PM)mason Wrote: But having bad credit is a pretty reliable indicator of an unreliable employee. Hiring unreliable people adds stress to coworkers, hurts the company financially, and can ultimately impact the salaries and security of other employees.

Give a scientific study or two showing that bad credit is a pretty reliable indicator of an unreliable employee.

I could maybe understand that having a bad credit rating in very good times is a reliable indicator of an unreliable employee, but a bad credit rating in bad times would appear to be meaningless and more of an indicator of bad luck.

You mean a statistical study? I don't consider those scientific. Either way, no such study would ever be funded, and if it were no credible (PC) journal would publish the results. However, there are plenty of studies that conclude bad credit (a.k.a. bad financial decisions) is correlated with risky behavior or bad judgement. Here are a few at random:

https://www.sciencedirect.com/science/ar...1316300997
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5641572/
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5285332/

Mason, did you read those 3 papers?  They say nothing about credit scores, good or bad, being correlated with risky behavior or bad judgment.

In reality, all a credit score indicates is whether or not you have the money to pay your bills.  Thus I  would wager that bad credit scores are really correlated with poverty.

As I said before using credit scores as an indicator in a study is not something likely to ever be funded or published. But those papers said plenty about making bad financial decisions. Getting a bad credit score is a fair measure of that, and while there are exceptions and outliers companies do still hire people with bad scores. It is similar to checking someone's social media postings to determine if they have a history of poor behavior, except with credit scores you can ask them to explain what happened during an interview.

And I disagree that a credit score determines only if you have the money to pay your bills. People who have the money often choose to do something else with that money. Those same people will often wake up tired and choose to call in sick then go back to sleep. They may choose to spend their money on non-essentials while neglecting car maintenance. The list is endless.

Finally, I find it strange you would discount the statistical nature of credit checks while asking for statistical studies to prove you wrong. I agree low credit scores are correlated with poverty, then again so are risky behavior and poor judgement. An employer is responsible for protecting the company as well as the existing employees from potentially harmful new employees.

During the 2007-2008 period, the Wall Street elite banksters had some of the highest credit scores in America.  Then, through their risky behavior and bad decisions, they proceeded to almost crash the economy of the United States and had to be bailed out by the Federal Reserve and the Federal Government.

Even today, the Federal Reserve monitors these high credit score individuals to make sure they don't again almost crash the economy the United States.

The elite are high credit score individuals and they are about 3/4 CEOs who are continually making bad decisions and bankrupting their companies.

I would argue that high credit scores are indicative of risky behavior and bad decision making.
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#8
(09-18-2018, 05:34 PM)ModestProposals Wrote:
(09-18-2018, 01:02 PM)mason Wrote:
(09-18-2018, 08:31 AM)ModestProposals Wrote:
(09-17-2018, 04:16 PM)mason Wrote:
(09-17-2018, 01:27 PM)ModestProposals Wrote: Give a scientific study or two showing that bad credit is a pretty reliable indicator of an unreliable employee.

I could maybe understand that having a bad credit rating in very good times is a reliable indicator of an unreliable employee, but a bad credit rating in bad times would appear to be meaningless and more of an indicator of bad luck.

You mean a statistical study? I don't consider those scientific. Either way, no such study would ever be funded, and if it were no credible (PC) journal would publish the results. However, there are plenty of studies that conclude bad credit (a.k.a. bad financial decisions) is correlated with risky behavior or bad judgement. Here are a few at random:

https://www.sciencedirect.com/science/ar...1316300997
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5641572/
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5285332/

Mason, did you read those 3 papers?  They say nothing about credit scores, good or bad, being correlated with risky behavior or bad judgment.

In reality, all a credit score indicates is whether or not you have the money to pay your bills.  Thus I  would wager that bad credit scores are really correlated with poverty.

As I said before using credit scores as an indicator in a study is not something likely to ever be funded or published. But those papers said plenty about making bad financial decisions. Getting a bad credit score is a fair measure of that, and while there are exceptions and outliers companies do still hire people with bad scores. It is similar to checking someone's social media postings to determine if they have a history of poor behavior, except with credit scores you can ask them to explain what happened during an interview.

And I disagree that a credit score determines only if you have the money to pay your bills. People who have the money often choose to do something else with that money. Those same people will often wake up tired and choose to call in sick then go back to sleep. They may choose to spend their money on non-essentials while neglecting car maintenance. The list is endless.

Finally, I find it strange you would discount the statistical nature of credit checks while asking for statistical studies to prove you wrong. I agree low credit scores are correlated with poverty, then again so are risky behavior and poor judgement. An employer is responsible for protecting the company as well as the existing employees from potentially harmful new employees.

During the 2007-2008 period, the Wall Street elite banksters had some of the highest credit scores in America.  Then, through their risky behavior and bad decisions, they proceeded to almost crash the economy of the United States and had to be bailed out by the Federal Reserve and the Federal Government.

Even today, the Federal Reserve monitors these high credit score individuals to make sure they don't again almost crash the economy the United States.

The elite are high credit score individuals and they are about 3/4 CEOs who are continually making bad decisions and bankrupting their companies.

I would argue that high credit scores are indicative of risky behavior and bad decision making.

Ha, fair enough, but you are looking at an extremely small and specific subgroup compared to the total work force. Those would fall under the aforementioned exceptions and outliers. They also don't fit well into the thread topic concerned with a poverty trap - except as a cause, of course.
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