The Misuse of Credit Reports is Rising

Credit reports are not scrupulously accurate and complete.

In recent weeks, a growing number of media reports have highlighted the problems posed by employment related credit checksThe New York Times even warned that "using a credit record as a key factor in hiring could marginalize millions of families and create a new, credit-record underclass."  It's an important point, especially since no credible studies link credit history to job performance. But as a new research study from Demos shows, the risk of a "credit-record underclass" goes still further, extending to insurance companies, utilities, and even hospitals - all entities that increasingly rely on customers' (or patients') credit histories to make decisions that impact Americans' economic security and opportunity.

In the report, co-author Shawn Fremstad and I explore the "mission creep" of credit records beyond their traditional use in lending decisions and look at the troubling ways that the credit reporting system falls short on basic goals of fairness and accuracy. While it's well known that having poor credit can mean a consumer will pay a higher interest rate for a loan, or not get the loan at all, what is less known is that a poor credit score can also mean paying a higher premium for car or homeowner's insurance; having their application for insurance denied; being turned down for a job, or even being terminated from their current one. Credit history can affect the way Americans are treated by landlords, utility companies, and hospitals.