A low credit score can mean many things.
It may mean that you are an unreliable and irresponsible person and therefore the unelected-yet-very-powerful credit reporting agencies have determined that you are not to be trusted with loans of large sums of money.
It's far more likely, though, that it means you simply don't have large sums of money at your disposal, and therefore the almighty CRAs are simply noting that you would not have the means to repay such loans.
The former is a matter of character. The latter is a matter of circumstance. Credit scores are not designed to distinguish between the two, yet increasingly they are being used as though they were solely a measure of character.
Credit scores aren't just for lenders anymore. Now employers are using these scores to screen potential employees. This is only slightly less arbitrary and foolish than if they were using phrenology or astrology.
One factor that can drastically lower a person's credit score is if they are unemployed. This means that the mere fact that you need a job is now considered, by some companies, to be a reason not to give you one. Didn't poor people face enough Catch-22s already without these idiots having to invent a new one?
I've written about this before (see "Plastic Handcuffs"), objecting to the way this economic measure is being used to make moral judgments. The implicit idea is that wealth and the wealthy are inherently virtuous while the poor are morally suspect. The next leap of illogic is that the poor therefore probably deserve their lot and that it would be somehow unjust to give the filthy Dalits the opportunity to work their way out of poverty.
I'm revisiting the topic because of Stacy A. Teicher's article "Judged by the content of your credit report" in The Christian Science Monitor. Teicher agrees that this credit creep is disturbing, and she finds both academic and professional experts who point out that it serves no legitimate purpose.
Dr. Jerry Palmer, a "professor of industrial and organizational psychology at Eastern Kentucky University in Richmond," studied a group of workers to see if there was any correlation between their reliability and performance on the job and their credit scores. There wasn't.
"As a measure of conscientiousness or attention to detail," Dr. Palmer says, "it's not very good."
Teicher also introduces us to Paul Barada, who checks references and screens potential employees for a living:
Credit reports can help employers verify people's identity, and in some cases they can be useful as part of an overall profile, but many companies use them as a substitute for real hiring diligence, says Paul Barada, president of Barada Associates, a reference-checking firm in Rushville, Ind.Especially in the security-conscious atmosphere since 9/11, many employers have started using credit reports — but not much else — to screen new hires. "It's horribly misguided," Mr. Barada says. "It's the penny-wise, pound-foolish way to claim you've done something."
These companies may even leave themselves open to claims of discrimination, because the use of credit reports in some other contexts has been shown to put minorities at a disadvantage.
That last point — "the use of credit reports … has been shown to put minorities at a disadvantage" — seems to invite a class-action lawsuit from the Rainbow/PUSH Coalition.
Part of what's going on here seems to be what Alfred North Whitehead called the "fallacy of misplaced concreteness." Your credit score is just that — a score, a number, a measurable quantity. If you present people with a precise enough figure, based on complicated and precise calculations, they think that you're offering something with the kind of mathematical, empirical-law-of-nature authority that physicists used to claim. It doesn't matter if the formula consists of a hodge-podge of subjective multipliers and that the entire enterprise is premised on the nearly arbitrary attempt to assert that certain qualities are worth, oh, let's see, we'll give this five points … no, ten. To a certain kind of person — the kind of person who is intimidated by the authority of math and science, but doesn't really understand them — the quantitative data provided by a credit score seems rock solid.
Then there's that word: score. That also seems to drive the increasing use of credit ratings in places where they have no business being used. We like to keep score — to see who is winning and who is losing. I doubt it's possible to underestimate the seductive way in which the use of such scores to winnow out prospective employees serves to reassure the people doing so that they are winners.
"I have seen something else under the sun," the Teacher says in Ecclesiastes 9:11:
… The race is not to the swift
or the battle to the strong,
nor does food come to the wise
or wealth to the brilliant
or favor to the learned;
but time and chance happen to them all.
John Rawls took this basic truth and crafted an entire theory of justice out of it. Those who think that a person's bank balance is a sufficient measure of their character would do well to remember it.