Credit Reports Being Taken Into Account

Brenda Matthews thought she had a new job lined up at Johnson & Johnson headquarters in New Jersey.

After applying online for a position as a patent specialist, she was called in for interviews that seemed to go well.

“I met with the office manager, the supervisor I would have worked with,” said Matthews, 27, a single mother who lives in Newark, N.J. “They loved me.”

And, in fact, she was offered the job. But then Johnson & Johnson ran additional background checks and came up with information on her credit report that the company found unsatisfactory.

“Just a few hours later, they wanted to take the offer back,” Matthews said. “I told them, ‘I’ve already told my employer I was leaving.’ I felt they were playing with my life.”

Johnson & Johnson said in a statement that its background checks enabled the firm to “identify the existence of negative credit payment history, such as delinquency and default.” It added, “a negative credit payment history may impact a job offer where the history identifies issues significant to the position involved.”

Credit reports have long been used to determine whether consumers can get credit cards and mortgages, and the rate they’ll have to pay on them. But these reports -- and credit scores generated from them -- are increasingly being applied to other things, such as setting auto insurance prices and screening prospective tenants and job applicants.

Consumer activists say the system is unfair to many Americans, especially those with little credit experience or with blemished credit records. And some people have begun fighting back in the courts.

“The reality is there are many permissible reasons for organizations to pull your credit report,” said Evan Hendricks, a privacy expert who wrote “Credit Scores & Credit Reports: How the System Really Works, What You Can Do.” “At the same time, it’s confusing, shrouded in mystery and constantly changing -- and that works against consumers.”

Several states including California have moved to limit the practice, and the Federal Trade Commission is studying scoring to try to determine whether it unfairly drives up the cost of insurance for some consumers.

Jeanne M. Salvatore of the Insurance Information Institute, a New York-based industry group, said “insurance companies have found a correlation, statistically, that people who have a poor [credit] score file more claims than those who don’t.”

And, she said, the scoring system cuts both ways -- people with better scores pay less for their insurance.

Credit reports are the records kept by credit rating firms that track the amount of credit consumers have and whether they pay bills on time.