Posted by: spacewritinguy | October 12, 2008

Credit Rating and Character

I saw the following article on MSN.com, and felt that it required comment:

“Does Bad Credit Make You a Bad Person?

http://articles.moneycentral.msn.com/Banking/YourCreditRating/does-bad-credit-make-you-a-bad-person.aspx?page=2

Excerpts include:

After all, what does poor credit really have to do with a person’s ability to be a good worker or a safe driver?

The answer, critics say, is nothing. The evidence is slim to none that credit history accurately predicts any behavior outside of borrowing.

“Our belief is that people who are careful and prudent in managing their finances are also careful and prudent in other areas of their lives,” says Michael Gaughan, a vice president at TransUnion. “They’re prudent and careful in how they manage one of the largest assets in their lives, their home, and in how they lock up and care for their vehicle.”

Piper Hoffman, a partner at Outten & Golden, an employment law firm in New York, gets calls every month from workers at all income levels who have lost job offers after a credit check. Some had already been working on a temporary basis and were well-liked.

One man, an executive, had damaged his credit after taking out a second mortgage to pay his mother-in-law’s medical bills. “And he found the job offer being withdrawn because essentially he was being a good son-in-law and taking care of his family,” Hoffman says.

The assumption, she thinks, is that people with debt will embezzle funds, “which is another way of saying ‘we don’t trust poor people.’ And there’s no evidence of that.”

Individuals looking for work in the government or government contracting industry must undergo a credit check, and that check is keeping more and more young people out of the market. Why? It’s not just a matter of “discrimination” against people with credit card bills. These same individuals who seek sensitive employment sometimes have other issues going on, which are uncovered when they have their criminal background check.

The bottom line is often impulse control. Can these individuals resist the urge to spend on pleasure for themselves to the detriment of their basic needs or financial solvency? Are they going into debt because of drugs? Do they have any drug- or alcohol-related arrest in their past? The two reports together–credit and criminal background–go a long way toward determining whether someone would make a trustworthy employee or not.

Debt in and of itself is not a bad thing, especially if you’re living within your ability to pay and pay on time. The answer to “Does debt make you a bad person?” is “That depends. What else have you done?”

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