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The credit score employers myth; Connecticut to Oregon to Texas

Misinformation and nonsense everywhere; a newspaper, CPA trade associations, another major university

| By Greg Fisher,

"It’s never too early (or too late) to learn how to make smart personal finance decisions. Money Wise Aggie is here to help." The president of Texas A&M University

Employers do not use credit scores.

However, Texas A&M University made this false statement:

If you miss payments or are late on your payments, you lower your credit scores and make it more difficult to obtain low interest loans. These scores are also used by landlords in making rental decisions and by employers in hiring decisions. (alt., 12/13/14)

As with a North Carolina institution in a previous story, the big myth also lies in another Ivory Tower, ready to misinform young, innocent seekers of truth in Texas, too.

This is about, verity, itself. But, let's go back to the beginning.

I read it on the internet

The subject of credit scores is regularly used by organizations as fodder to justify their existence. But, unfortunately, through a mix of ignorance and influence, they regularly wreak havoc on truth.

This story starts in New England—Connecticut, specifically. The Charter Oak state has special status: It is one that really blew it, passing a law based on the mistaken assumption that employers use credit scores. The legislators got their information from sworn testimony from many witnesses.

And, the myth continues.

Even the smallest leafy burgs' newspapers have access to a big audience through internet news search engines. And hey, Babe, when it appears at the top of an SERP, who in da bidness can resist a headline like "Pump up your credit score"?

That's how it reads above a story on the website of Connecticut's Easton Courier, a weekly newspaper. A junk-journalism fluff piece to promote the Connecticut Society of CPAs, it screams at you, begging for scrutiny. The article encourages readers to rely on their certified public accountant, and wraps with "Turn to him or her for advice on all of your financial questions."

All of your questions. And you'll get a doozy of an answer too. They know everything. They're CPAs!

It isn't clear what review of credit reports and scores tax accountants do in their regular course of business (or why they're looking at them in the first place—that is, if they do, at all), but the trade association in Connecticut is happy to jump in with their take on credit scores. And why not? Everybody else is.

Here's the premise of the article:

Are you looking for a surefire solution that will lower the interest you pay on your mortgage, car loans, credit card accounts and other debt? If so, there's one easy answer: Raise your credit score. The Connecticut Society of CPAs offers the lowdown on why your credit score is important and how it can affect your financial life.

Apparently, it is that simple: Increase credit score, save money. Easy, breezy. No mention of haggling with your car loan company or thousands in closing costs to refinance your house. Somehow, a higher score just magically makes lower rates appear. It's surefire, according to your CPA.

And there is more in this accountancy land of fantasy. But, who needs a newspaper when you have your own website to tell your stories?

Efficacy of a social media message

Here are social media messages to organizations helping to spread the employers-use-credit-scores-myth.

That's right. The big one: The employers myth, right on the Connecticut Society of CPAs website. In "Credit Cards: What You Don't Know CAN Hurt You," see page 21 (titled "Credit Scores"), which says, erroneously, "Many organizations use it (cell phone providers, utilities, auto insurance, employers, gov’t depts, etc.)."

The document also claims that scores range "from 300 to 900."

In reality, FICO broad-based credit bureau risk scores range from 300 to 850 (an old story; see Fun with Numbers).

But, the worst thing about that little dog-and-pony show (attributed to the Oregon Society of CPAs, and available worldwide) is the assertion that income is a credit score factor. It is not.

The document is in slideshow outline format, so supposedly somebody actually stood and said the false words, too.

The presentation begins with "We are financially illiterate."

That, at least, collectively speaking, is true.

Myths, nationwide

And so, the Oregon document on a Connecticut website refers to 360 Degrees of Financial Literacy, a project of the American Institute of CPAs. The myth lives—on the Right Coast, the Left Coast and everywhere in-between.

According to the national organization, referring to broad reforms pursuant to the Dodd-Frank consumer finance legislation, "Another change is your ability to get your credit score for free if you were turned down for credit, housing, or a job based, in part, on your credit score."*

* Applicable only on planets where employers use credit scores.

The Money Doctors of the AICPA are a panel of CPAs who are not only certified, but are also "qualified" as Personal Financial Specialists; they have a credential (from the organization making the misleading statement above about employers) for comprehensive financial planning.

They do a Q&A with members of the audience, like this:

I need to increase my credit score I owe 250. On a credit card 250.on a department card and 400. Cable bill my current score is 530.

An anonymous Money Doctor assigns the standard get-your credit-reports-and-check-for-accuracy busywork, and then

Second, see if you have any unused lines of credit or credit cards[SIC] Having too much outstanding credit, even if not used, can decrease your credit score.

Wrong. The doctor just removed the wrong lung and sewed that guy up without removing the forceps.

The proportion of balances to credit limits of accounts is well-known as a factor that a person can actually control. If anything, he might want to get more and higher credit lines (and use them to add positive payments to his credit history).

A Fair Isaac spokesman said that closing credit cards will not improve a FICO score. Further, he states, "And in some cases, can in fact hurt your FICO score."

A redeeming value of the answer from the "Doctor" is a link to a Fair Isaac website. If anybody knows the secrets of the FICO score, it is its namesake. Why go anywhere else?

So, the Connecticut newspaper is connected to the state CPA association who is connected to its counterpart in Oregon who teamed with the national boys.

No reply.

"Higher education"

The national accountants' organization website offers this bit of falsity, written by a faculty member of Texas A&M University:

When a lien is filed, credit reporting agencies update the taxpayer's credit report, dropping the credit score by about 100 points (IR-2010-83). Employers, landlords, car dealerships, credit card issuers, and insurance companies often use credit scores to decide whether to rent to or employ individuals and to set fees and rates for clients.

In her universe, employers don't just use credit scores, they do so often (see the trope Even, a similar phenomenon).

Employers do not use credit scores.

The efficacy of a social media message

And, again, here is what the professor's institution of higher learning has to say:

If you miss payments or are late on your payments, you lower your credit scores and make it more difficult to obtain low interest loans. These scores are also used by landlords in making rental decisions and by employers in hiring decisions.

Employers do notaye, yi, yi.

The big shots in any organization probably have mixed feelings about social media as a means to engage the public. It is messy business, and, with a few commendable exceptions, just ends up as passive-aggressive anti-social media—and another one-way communication device for emperors with no clothes.

Truth takes a back seat to public relations.