Credit Score Financial Literacy

Greetings from the classic musical city of Vienna, Austria, where my wife Eva and I are visiting relatives, before returning home to LA.

The world is sooo small if you have access to the internet.

I came across an intriguing question on the bank rate website.

Your Boss Can Pull Your Credit. Who Else? 
By Steve Bucci • Bankrate.com

Dear               Debt Adviser, My husband's boss is rumored to periodically view credit reports of his employees. Can a boss do this and how do we stop this from happening? Thanks! Carol

See the continuation below for Steve Bucci's answer.

Alex Weiss, co-founder
www.WealthBuilderUniversity.com

Dear Carol,

The boss needs written permission to access your credit report. From your letter it is
hard to tell whether your husband has given his permission. Chances are it was a part of his
employment application or the terms of his employment. You should be aware that many
other employers do the same thing. If your husband isn't sure he has given his permission, he
can check with human resources to see what company policy is.

Why is an employee's credit of interest to a boss, you ask? In the case of prospective
employers, how you handle your finances may reflect how you handle other aspects of your
life. Always being late paying your bills might indicate a penchant for being late for work. A
bankruptcy or other public record may indicate a lack of sound judgment or the possibility of
work-distracting financial problems.

For a current employer, it might make a difference if two candidates were up for a promotion
and there was only one opening. It is a red flag. Dr. Tom Garman did some research a few
years back when he was at Virginia Tech that clearly showed bad credit is a distraction from
the job. Wage garnishment and creditor calls at work are just two ways that bad credit can
have an impact on an employee's productivity.

This is all part of the trend to use credit history outside of traditional lending. Insurers and
employers have found that credit behavior does not exist in a vacuum and can be predictive of
future behavior in other areas. I even know some love-smitten couples who would not say "I
do" without a gander at their sweetie's credit profile.

So, you can see the consequences of bad credit are becoming more far-reaching every day.
Recently, some troops were denied deployment due to bad credit, and many can't get a
job-required security clearance because they can't seem to manage to pay their bills when
they are due.

Of course, this is in addition to the usual pain and suffering caused by high interest rates,
excessive fees and the unpleasantness of having to deal with progressively hungrier lenders
as your credit history deteriorates.

So, what can you do if you are one of those conservative Americans who prefer the
government and employers not have access to your private life and records?

In some states, a credit freeze can keep your employer out of your records. However, this is
not the case in all states that allow a credit freeze. Go to the Federal Trade Commission Web
site for details on your state. If you don't like what you see there, I suggest you write your
state senator and representative to change the local law.

My guess is that the boss is simply trying to be prepared. My advice to you is that you check
your reports yourself so that you know what the boss is seeing. You can get a free copy of
your credit reports annually at www.annualcreditreport.com.

If you find mistakes, correct them. If you have had some financial challenges, take charge
right now. Set some financial goals, create a budget, start saving regularly and pay your bills
on time, every time. If the boss is going to raise the ante on your credit, you might as well be
holding all the aces you can!

Good luck!

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial
Education Foundation and the author of Credit Repair Kit for Dummies. Visit MMI for additional
debt advice or to ask a question of the Debt Adviser go to the "Ask the Experts" page.

Posted: Aug. 24, 2007

Comments

[Economic and Culture Observer (Lenno Cornish)]

I may agree with a responsible wish of bosses to know the credit score information of his/her employees. But as far as I know every this request affects negatively at the level of credit score. So - what can be done with it?

[Alex Weiss]

Hi Lenno,

Thanks for your question.

According to http://www.myfico.com/CreditEducation/CreditInquiries.aspx
"Credit checks by prospective employers also do not count" as inquiries that will raise your score.

The full section follows below.

Alex

"What is a credit inquiry?

A credit inquiry is an item on a credit report that shows a business with a "permissible purpose" (as defined under the federal Fair Credit Reporting Act) has previously requested a copy of the report.

Not all credit inquiries count toward your FICO® score.

When you check your credit report, you may notice that a number of credit inquiries have been made, sometimes from businesses that you don’t know. But the only inquiries that count toward your FICO® score are the ones that result from your applications for new credit.

* Inquiries that count toward your FICO® score.

There is only one type of credit inquiry that counts toward your FICO® score. When you apply for a mortgage, auto loan or other credit, you authorize the lender to request a copy of your credit report. These types of inquiries, prompted by your own actions, appear on your credit report and are included in your FICO® score.

* Inquiries that don’t count toward your FICO® score.

Your own credit report requests, credit checks made by businesses to offer you goods or services, or inquiries made by businesses with whom you already have a credit account do not count toward your FICO® score. Credit checks by prospective employers also do not count. These types of inquiries may appear on your credit report, but they are not included in your FICO® score."

[Hamed Elbarki]

It sure doesn't seem right to me no matter which way you look at it.

[Alex Weiss]

Hi Hamed,

I guess this is just another application of the concept that "he who has the gold makes the rules".

Alex

[Kral Oyun]

Thanks alot.

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