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Liberal_in_LA Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:03 PM
Original message
Employer Credit Checks May Soon Be Illegal
Posted July 23, 2010 Employer Credit Checks May Soon Be Illegal

By Jeanine Skowronski

Heres the bad news: A majority of employers pull credit reports of prospective employees during the interview process. According to a survey conducted by the Society of Human Resource Management , 60% of employers admitted to screening an applicants credit before filling some of their openings.

The good news is that the cycle may not continue for much longer. Many states and even the federal government are taking steps to ensure that a candidates bad credit report isnt issued to evaluate a prospective employee, especially since the report was never intended for that particular use.

Additionally, Larry Lambert, President of Employment Screening Services, Inc., explains that a credit report pulled for employment purposes doesnt contain an actual credit score. Under the Fair Credit Reporting Act, that is illegal. Once obtained, the report will disclose mortgage and consumer debt payment records, delinquencies, charge-offs, levels of debt and personal bankruptcies. As such, many employers use it as a defacto character reference, essential to determining whether or not an employee can do the job in question. Employers cant pull your credit report without your permission, but most jobseekers will sign off on the request forms for fear of losing out on the position.

----------

These sentiments are why three states Washington, Oregon and Hawaii have banned employers from arbitrarily pulling credit histories. Sixteen other states are currently trying to implement similar legislation. Additionally, according to The New York Times, Rep. Steve Cohen (D-Tenn.), is pursuing his own legislation that would prohibit employers nationwide from using credit checks to discriminate in hiring.

All versions of these laws, in essence, prohibit employers from pulling an applicants report unless there is a clear, legitimate business reason for it. For example, Lambert explains a maintenance company wouldnt be able to request a credit history when they are hiring a janitor. They would, however, be able to if they were hiring a company accountant.


http://www.mainstreet.com/article/moneyinvesting/credit...


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bobbolink Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:04 PM
Response to Original message
1. What about for renters, or for car insurance?
All of this is just evil.
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Recursion Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:09 PM
Response to Reply #1
2. The rental thing really, really pisses me off
I screwed up my credit at one point because I put off paying my credit card bills in order to make my rent on time, and then that locks me out of housing for 3 years.
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ejpoeta Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:10 PM
Response to Reply #2
4. i guess people with bad credit should just have to live in their cars??
that is crap. why should past history necessarily affect current situation, considering you generally have to give first AND LAST month rent as well as a security deposit to get an apartment. if you don't pay your rent, then they can kick you out can't they?
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bobbolink Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 04:20 PM
Response to Reply #4
10. Yup. It'll be a party. Add to this..... many shelters are now charging per night for stays.
Some in this area are charging $40 a night.

Isn't that a great way to keep people stuck?
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rucky Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:25 AM
Response to Reply #4
43. It's a great way to control people, eh?
Did you know that Fair Isaac - the company that does the FICO scores, is private? Their method to compute scores is a secret.

People's character is being judged by this score, and it profoundly affects their lives. There's little or no recourse for things that are misreported. My score went down 100 points one month for no reason at all. It climbed back up 120 points the following month. Again - no reason.

How can people put so much trust into something so arbitrary?
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pipi_k Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:43 AM
Response to Reply #4
50. My BIL owns a couple of apartment buildings....it's not
that easy to just kick someone out.

Not in Mass, anyway...
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walldude Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 11:06 PM
Response to Reply #50
119. It's different in every state... I live in Colorado and the law here
favors the landlord. Which is good when it comes to getting into a place because they are more likely to overlook bad credit if you have good references but bad once you are in because they can basically kick you out for any of the smallest infractions.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:11 PM
Response to Reply #4
103. In Washington DC, the transit system a 20% enacted fare hike for not using plastic to pay for fare.
Edited on Tue Jul-27-10 05:13 PM by Leopolds Ghost
Cash customers who do not purchase an RFID card (which they plan to phase out and replace with bank card access only) must pay 20% extra to use an ordinary farecard.

This is in response to the artificial strangling of rail transit operations funding under the Bush / Obama admin and local gov't of course.

Oh, and local "Democratic" yuppies -- policymakers, highly paid activists and the like -- uniformly cheered the move, saying it would put more of the burden for paying for the system on "tourists and people who don't ride the system every day."
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rucky Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:20 AM
Response to Reply #2
40. Exactly. Credit checks are meaningless.
Saying this as a landlord & former mortgage originator.

I don't check credit for my tenants, but two the best tenants I've had have told me upfront about their credit problems. I had a couple of real duds who assured me that their credit was spotless.

What I do to screen tenants is a simple verification of employment. Even that doesn't tell you much, except if they're lying.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:20 AM
Response to Reply #40
49. "I had a couple of real duds who assured me that their credit was spotless.
Might be worthwhile to actually check credit then right?

If nothing else if their credit didn't match their self described spotlessness it would indicate some lack of trustworthiness?
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rucky Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:15 PM
Response to Reply #49
51. Nope.
Credit is not an indication of character. Lying is.

As I said, a simple call to the employer covers that.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:37 PM
Response to Reply #51
55. "Credit is not an indication of character. Lying is."
Right and a credit check would have confirmed the lying before your rented to them. :)

Trust but verify.
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rucky Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:49 PM
Response to Reply #55
57. You're assuming they're lying about their credit.
I already said I've rented to people in bankrupcy who were never late on rent.

If someone's credit were good, what would that have told me?
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:54 PM
Response to Reply #57
58. About their charecter? Nothing.
Edited on Tue Jul-27-10 12:57 PM by Statistical
About their level of leverage? There existing obligations? The likelihood that they can make payments without running into financial difficult? A lot.

People default on rent for a lot of reasons that have nothing to do with character. Some people just have an inability to recognize leverage. If a household has $2,600 take home pay and the rent is $1,200 but they have $200 minimum credit car payments, $200 in student loans, and $700 in car payments something tells me it isn't going to end well no matter how "good" of people they are.

I also didn't say running their credit WOULD tell you anything about their character but rather it would indicate if they are a "dud" if their assesment didn't match reality. It shows either a complete lack of understanding on what "good credit is" (as you you need to pay people on time) or a lack of honesty. Neither of which makes a good tenant.
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rucky Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:05 PM
Response to Reply #58
61. I was a mortgage originator.
I know all about this shit. A VOE works just fine for the below-market rentals I'm offering.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:17 PM
Response to Reply #58
104. Do you think people with bad credit are bad risks in general?
Let's just assign everyone a number and an RFID card.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 06:47 PM
Response to Reply #104
111. Bad Risk is general?
As in a risk in life? Hardly.

Do people with lower credit score have a higher risk of defaulting on a financial obligation including but not limited to rent payment? Of course they do. That is the whole point of credit scoring system. There is decades of historical evidence to validate that correlation.

Does everyone with low credit score fall behind on payments? No of course not.
Does everyone with high credit score make payments on time? Also of course not.

Does the likelihood of default correlate with lower credit score? Sure. That is why it is used.

"Let's assign everyone a number"
Um newsflash you already have a defacto identity number is it called your social security number.

"and an RFID card"
What purpose would that serve?
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:06 PM
Response to Reply #2
101. No, Since Clinton Admin, only people w/ good credit are eligible to return to Public Housing
After it has been torn down under HOPE VI or Obama-supported teardown ofg every public housing project in Chicago, New Orleans, every Blue city you can name.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:08 PM
Response to Reply #101
102. So the answer to your q? is No, HA's MUST be able to check credit in order to get of public housing.
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KansDem Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:11 PM
Response to Reply #1
5. I agree...
One of the impressive characteristics of Americans is their ability to spring back from adversity. But how do you do that with all these "boots in the back of your neck" practices form CorpAmerica?

It's getting more difficult...
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catzies Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:15 PM
Response to Reply #5
6. Yeah! When's the boot's on the back of your neck it's hard to reach the bootstraps.
:mad:
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OneTenthofOnePercent Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 04:42 PM
Response to Reply #1
12. As far as renters go...
I think entering into a financial contract with an individual should carry with it the assurance that the tennant can pay their bills. Especially when, in many states, tenants cannot be immediately evicted (a good protection for tenants). As a landlord, I'd charge less rent to someone with a known good credit history than somebody with below average or unknown credit... extenuating circumstances aside, of course.

As far as insurance... I'm really at a loss to see how my credit affects my driving skill or alertness. About the ONLY connection I can make is that someone with poor finances and bad credit may be a higher risk for insurance fraud. ??
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bobbolink Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 04:59 PM
Response to Reply #12
13. "extenuating circumstances" are never taken into account.
Of course, a high rate of homelessness in this country is not something of concern.
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Morning Dew Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 07:03 PM
Response to Reply #12
17. Car insurance
I think I have this one figured out.

People with "good" credit will make fewer claims because they can eat the cost of their fender benders and not have their insurance rates go up.

So if you have less than great credit you pay more from the start and then get to pay more when you make a claim.

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MicaelS Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:06 AM
Response to Reply #17
20. The problem with credit checks for auto insurance is
What happens if you want to shop multiple insurance companies for the best quote. They all advertise "You'll save money with X over Y." How do you know that unless you check multiple companies, all of which check your credit? The result is multiple hits against your credit.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 07:39 AM
Response to Reply #20
32. When auto insurance companies pull your credit it is a "soft inquiry"
Edited on Tue Jul-27-10 08:08 AM by Statistical
has no affect on your score, same thing with rent check, or employer check, or checks you don't request like CC company doing check to up your credit line. They show up on your credit report but are only visible to you. No creditor can see these and it has no affect on your score.

Only "hard inquiries" which are a credit check you explicitly request for the purpose of obtaining credit can be seen by all creditors and affect credit score.
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tammywammy Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 07:41 AM
Response to Reply #32
33. And to add to that
If you're looking to purchase a new vehicle and go to multiple dealerships within a two week period (I believe it's 14 days) and they all want to pull your credit, it counts as 1 hit, not multiple.
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hobbit709 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:13 AM
Response to Reply #17
39. People with not so good credit
Edited on Tue Jul-27-10 09:13 AM by hobbit709
will probably not put in a claim since they can't afford the deductible if the vehicle is driveable.

The only claims I ever filed were to the insurance company of the clowns that hit me. I haven't been in an at fault accident in over 20 years.
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mathewperry Donating Member (1 posts) Send PM | Profile | Ignore Fri Jul-30-10 04:57 AM
Response to Reply #39
123. RE: People with not so good credit
I think all these factors considered together, balance the rates. If bad credit scores increase rates, clean driving record bring them down. My car insurance company (http://aarp.thehartford.com/Auto-Insurance ) gives me a discount because I work from home, which means that I drive less. For the life of me I cannot understand though, why being married or remaining single should affect your rates! What do they do if you get divorced? Hike up your rates again?
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Curmudgeoness Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 07:14 PM
Response to Reply #12
18. I have to agree that rental agreements are financial documents.
The person renting out a property should be able to have a reasonable assurance that they will have rent paid on time. This is the same as buying furniture or a car on credit or using a credit card, or buying a house. With that said, I would definitely tell a prospective landlord of any extenuating circumstances prior to them pulling a report. You would at least be considered honest, even if there were dings.
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Mnemosyne Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 11:57 PM
Response to Reply #12
19. So if someone had a tough time making bills, through circumstance, divorce, laid off, etc, you
think they should be forced to have even higher bills to try to survive, when it's already tough as hell to try to climb back out?

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OneTenthofOnePercent Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 07:23 AM
Response to Reply #19
29. Evidently, the meaning of the phrase "extenuating circumstances aside" eludes you. n/t
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Mnemosyne Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:58 PM
Response to Reply #29
72. Yep, I'm one of rahm's fucking retards.
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OneTenthofOnePercent Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 04:00 PM
Response to Reply #72
97. The good news is
Edited on Tue Jul-27-10 04:06 PM by OneTenthofOnePercent
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:27 PM
Response to Reply #19
54. That does seem to be the way of the world. :(
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Mnemosyne Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:59 PM
Response to Reply #54
73. It is.
:sad:
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:09 AM
Response to Reply #12
22. If they paid just like the person with good credit, should they get

the premium back after a year? 'Cause obviously the risk analysis was not correct,
and they shouldn't have to pay for bad analysis.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:14 AM
Response to Reply #22
24. It is called risk.
If the person defaulted he would lose thus if the person doesn't default he doesn't return the risk premium.

While an individual landlord will never have enough tenants to approach the expected return the use of risk premium is warranted even in a single transaction.

For example Warren Buffet insured Pepsi Billion dollar sweepstakes. Had someone won it Berkshire would be out one billion however one can't make a judgment on risk AFTER THE FACT.
It turns out nobody won and Berkshire collected the $3.7 million insurance fee. Based on logic after the fact Pepsi should have avoided the insurance of course nobody has view of the future otherwise there would be no risk. At the time Berkshire absorbed the risk and as such Pepsi paid them a premium.
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 03:18 AM
Response to Reply #24
26. I understand that. But it sounds like an excuse for greed.
Edited on Tue Jul-27-10 03:38 AM by jtuck004
I can understand why I would pay for a default swap on a tranche of sub-prime mortgages or on a Pepsi challenge.

But most landlords aren't Warren Buffet, and they don't have the statistical analysis to back up their claim. Some are making an assumption based on a business practice that says it's ok to stick it to people with a lower number because they are less powerful, not because they have a survey of thousands of tenants and comparative histories with others in the same category. And when they charge them more, they can't pay the rent, they default, then the landlord has their superstition confirmed. And in some cases they are renting lowball housing anyway, and those folks are likely going to move out anyway (they move frequently) and sometimes landlords take advantage of them using excuses like this. Why they can't just say they want to charge more without resorting to excuses like this I will never know. Car insurance companies are the same way. And it's the same reason they split off consumer warranties on manufactured goods - they make more money instead of building it into the price.

The reason cities put laws in place to protect tenants is because of landlord abuse. For example, many of them will shine up a place, rent it, and when the normal wear and tear of a year, or two, or five takes place, they expect it back in the same shape. It's like leasing a car - that wear and tear should be expected and built into the price, not punished. No landlord ever lives in their own home without wear and tear and it's unreasonable to expect renters to do that.

Some landlords are just not worth renting from.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 07:36 AM
Response to Reply #26
30. Except that statistical data is available.
Edited on Tue Jul-27-10 07:55 AM by Statistical
"not because they have a survey of thousands of tenants and comparative histories with others in the same category."
This exact data is available and routinely used. However it isn't just the score. With credit check/eviction/criminal check the potential employer has a lot more data that a single score. Balances, inquiries, public records, payment history, prior evictions, last landlord, etc. There is a high correlation (statistically significant) between credit delinquency and rent delinquency. Now no correlation is absolute. There are some amazing renters with horrible credit and there are some horrible renters with flawless credit however the exceptions doesn't invalidate the norm.




Most landlords I know don't use credit score as a hard/fast rule; i.e. no "650+ auto approved, 649 or lower auto denied". Instead credit score can be used to speed up the process. If you credit score in a 740 I don't need to look at the details. Also if your credit score is a 420 I don't need to look at the details either. If it say a 640 well that is a potential concern; I am going to look at it closely to find out exactly WHY. 640 due to too high credit card balance, and 2 random missed payments in last 2 years isn't a big deal. 640 due to 30/60/90 day late on multiple accounts plus a public record lawsuit from a rental company is a big deal.

Personally I simply won't rent to someone with an eviction history or poor credit. To me the return of my principle is more important than the return on my principle. I am not looking to score a jackpot off renters. If the rent covers my costs and mortgage I am happy. The equity in the home grows and belongs to me. Luckily rent demand for 2 bedroom townhouses in VA has held up and I haven't been forced to lower my standards. However if everyone did that then those with prior evictions and bad credit would never find housing available anywhere. Obviously someone has to take that risk and when they take that risk they will charge a risk premium.

It really is no different than a junk bond having a higher yield than a high grade corporate bond. Nobody takes it personal that BP has to pay a higher interest rate than GE. It is entirely possible (although unlikely) that GE will default and BP won't.
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 08:59 AM
Response to Reply #30
37. Actually, if the landlords decided to close it off, many people would

simply find their own shelter. They always have, and they always will. And if they can't then in the most cowardly and pathetic of communities they go to jail. And the landlord still pays.

And while the info is available, most landlords I know just aren't that sophisticated. They just bought into a place cause they
figured it was a good place to have their money appreciate. Most have little to no idea of the work involved. And the decisions they make are on emotion, not data. Your mileage may vary ;)



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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:07 AM
Response to Reply #37
38. Those landlords tend to go out of business.
Edited on Tue Jul-27-10 09:10 AM by Statistical
As they should. Capitalism at work. I have heard from many people that renting is utterly unprofitable. Somehow 10 years later I am doing "fine". It isn't get rich quick but in another 20 years these two properties will be paid off and all that equity will be mine. I hope to add a third property "soon" but not sure if I can get financing for a 4th mortgage in this economy.

Unsophisticated landlords tend to be broke landlords or they simply push all that work on a management company. Some survive by pure luck just like some people walk out of Vegas a winner however the margins on rent are small and one can go underwater very quickly.

"many people would simply find their own shelter. They always have, and they always will"
:rofl:

Really? In case you didn't notice it we aren't building any new land anymore. In the past people simply moved into the frontier and when they ran out of frontier they found another continent over here in America, and then pushed west. Unless science develops rapidly enough that faster than light travel becomes a reality we won't see any colonization of new land anytime soon.
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:34 AM
Response to Reply #38
44. Check out the tent cities or just try living on the streets for awhile.

There are a lot of places people don't know about...

Hope your housing thing works out. Lot's available out there now, if, as you said, you can get financing. I just hope the market holds up so you can capitalize on your hard work.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:45 AM
Response to Reply #44
45. "Lot's available out there now, if, as you said, you can get financing."
Yeah that is the problem. I have scouted some very nice properties in the area. I generally look for mortgage (including taxes & insurance) that is about 80% of rent. Right now there are a few decent properties more like 60%-70%. However it does no good without financing.

"Check out the tent cities or just try living on the streets for awhile."
That was my point. If everyone did what I did and simply not rent to riskier applicants then they would be homeless. Obviously some people do and they take a risk I am unwilling to do. As such they charge a premium for that risk. Me I am pretty boring when it comes to big chunks of money. Get rich slow and that requires avoiding if at all possible the massive cost of eviction and damage to property.
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OneTenthofOnePercent Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 04:05 PM
Response to Reply #45
98. Try a 1031 exchange on your properties to move from your 80% units to 60%-70% units.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:38 PM
Response to Reply #38
108. So you're ROFL'ing at the notion that people need a place to live.
Because by god, real estate should be PROFITABLE!

And it ISN'T a profit making business unlessyou have an increasing population and a finite supply of land (thanks to zoning restrictions you can have unlimited, degradory human sprawl in Virginia and STILL have a restricted menu to choose from).

Because if it isn't a landlord's market you won't have all that equity when you retire, so anyone who's got bad credit can stuff it.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:33 PM
Response to Reply #30
107. OK so I know where you're coming from. You're one of those NOVA real estate investors.
I have a friend who does the same thing. He's a Republican, of course, but many of them are affluent liberals, even 20-something turst fund babies. You invest in properties to make money, not to ensure some lowlife with bad credit has access to a place to live.

Poor = bad credit = should pay more not less, because they are a bad risk!
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:26 PM
Response to Reply #107
113. Bad credit doesn't mean poor. Lots of rich (even very rich) people have horrible credit.
Edited on Tue Jul-27-10 10:52 PM by Statistical
BTW I live in Hampton Roads not NOVA. My two properties doubled wouldn't even be enough for the smallest property in NOVA.
Never had a trust fund either. My uncle did pay for me to go to college. Does that count? His first name was Sam.

"You invest in properties to make money, not to ensure some lowlife with bad credit has access to a place to live."
Everyone invests in properties (or anything else) to "make money". It is merely a business decision.

"bad credit = should pay more not less, because they are a bad risk!"
I would say bad credit represents a potentially higher risk of default and thus to avoid long term positive return on investment it would be prudent to demand a premium for taking that risk.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:38 PM
Response to Reply #113
115. Even the non-poor people with bad credit didn't necessarily get that way
Edited on Tue Jul-27-10 10:46 PM by Pithlet
simply because they were irresponsible. There may have been issues beyond their control in their past. A divorce. A spate of unemployment. It's simply your rationalization to make a buck and nothing more. Credit is only one possible indicator. Landlords who rely heavily on credit to make their rental decisions are fools. And landlords who use it to justify charging more are merely being greedy. Renting out your space is not the same as extending credit. They aren't paying you back. You're exchanging a service for payment. Your remedy for non payment is to kick someone out regardless of how much rent you've charged them. There's no reason to charge them extra. There's no justification for it. Your costs are the same whether the tennant has good credit or bad, and your damages are the same if either "default" so it just pads your bottom line. Don't pretend otherwise.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:47 PM
Response to Reply #115
117. Read up on the concept of risk premium, rent a property for a decade and then get back with me.
Edited on Tue Jul-27-10 10:49 PM by Statistical
"Even the non-poor people with bad credit didn't necessarily get that way simply because they were irresponsible."
Nobody claimed it was. It simply indicates a situation where the likelihood of future default is higher.

"Renting out your space is not the same as extending credit."
Of course it is. The only instance where it wouldn't be if in a scenario where the tenants prepays the entire lease in advance along with a very significant security deposit (say 3 months rent). At that point there would be no risk of default and no likely risk of loss due to damage. Under such a scenario any 2 tenants should be charged exactly the same rent.

BP risk premium is higher than GE risk premium right now.
Do you think investors would buy BP bonds if they paid the same as GE bond?
No they demand a risk premium for the differential between the risk of GE defaulting and risk of GM defaulting.

You simply want to make personal something that is merely a matter or return on investment. Taking more risk to secure same return is foolish. At best your return is the same as a lower risk option. At worse you suffer a default (which is more likely to occur) and end up with a negative return.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 11:01 PM
Response to Reply #117
118. Who's making it personal? I'm just calling it what it is.
You're the one who wants to insist that renting out their property is the same sort of risk as extending credit or buying bonds. It's not. You aren't extending financial risk. You're entering into contract. You're providing a service for an agreed upon fee. Claiming that charging extra to make sure that the other party fulffills their end of the obligation to the contract is baloney. If you want to make sure the other party is financially able to fulfill their end of the bargain before entering the contract, then by all means. That makes perfect sense. But acting like you're a financial broker protecting their financial investment is malarky. It makes no more sense than my hairdresser charging me more because he thinks I'm more likely to skip out the door without paying him. Or my contracter charging me more because she thinks I'm not going to pay her for painting my house. Yes, sometimes in contracts both parties don't fulfill their obligations. It happens. You can do what you're able to mitigate that risk, but charging more doesn't really offset what happens when either party defaults, nor does it make sense.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 11:40 PM
Response to Reply #118
120. You almost got the concept of risk premium at the end.
Edited on Tue Jul-27-10 11:48 PM by Statistical
Yes, sometimes in contracts both parties don't fulfill their obligations. It happens. You can do what you're able to mitigate that risk, but charging more doesn't really offset what happens when either party defaults, nor does it make sense.

Of course it makes sense. It makes sense in thousands of financial transactions not just rent.

While higher risk premium can't reduce the likelihood of default it can ensure a long term positive ROI. It does so by increasing premium collected from those transactions that don't default to offset the loss from those who do.

Obviously if someone KNOWS that someone else will default then no amount of risk premium makes sense. Also if someone knows that someone WILL NOT default then no amount of risk premium is needed. However most of the world falls in-between.

Lets imagine a hypothetical property with no maintenance, no wear & tear, and no vacancies. The operating overhead (mortgage, insurance, taxes, etc) for the property is $1,000 per month. Also say in a default situation. The owner will lose 2 months of rent + $500 in damages beyond deposit.

Take two potential tenants. One has a risk of default of 5% per year, the other has a risk of default of 20%. Rent charged is exactly $1000 (exactly operating cost). Also for the sake of simplicity lets say when default occurs it occurs at month 9 in 12 month lease.

Say an owner charged $1000 in rent (equal to overhead).

5% default risk tenant
--------------------------
95% of time lease ends paid in full.
12x$1000 in revenue - 12X$1000 in expenses = $0.00 net

5% of time lease defaults at month 9.
9x$1000 in revenue - 11x$1000 in expenses - $500 in excess damages = -$2500 net loss

95% *(+$0) + 5% * (-$2500) = -$125 projected loss.

Ouch a long term projected loss. Now the owner could get lucky and always get the 95% who don't default but eventually the law of averages catches up. The casino always wins in a negative expectation game.

Now this doesn't mean that every time the property is rented $125 will be lost. Most of the time nothing will be lost and sometimes (5% of the time) $2500 will be lost however on average (say renting same property 100 or 1000 times) the total loss dividend by number of rentals will average $-125.

To avoid this loss rent can be increased by $20 per month. This is called a risk premium.

5% default risk tenant
--------------------------
95% of time lease ends paid in full.
12x$1020 in revenue - 12X$1000 in expenses = +$240.00 net

5% of time lease defaults at month 9.
9x$1020 in revenue - 11x$1000 in expenses - $500 in excess damages = -$2320 net loss

95% * (+$240) + 5%*(-$2320) = +$112 projected gain.

The risk premium turns the long run probable outcome from a negative ROI back into a positive ROI. The higher gain on successful lease offsets the loss on failed lease. Higher chance of default more risk premium needs to be collected.

At 20% default risk the risk premium in this scenario needs to be higher ($50 vs $10). This scenario is just a simplified example. Businesses both large and small routinely use risk modeling to determine the premium for a riskier action.

This is exactly why riskier bonds (BP vs GE) have higher interest rate to compensate for POTENTIAL loss.

Buy 100 AAA bonds in different companies and 100 BBB grade bonds in different companies. If the market has adequately priced both bonds they should perform the same over long term. Now the BBB bonds likely will have more defaults. But the higher yield from the bonds which DON'T default offset the losses from the greater number of defaults.

This concept isn't used just on rent but on all financial transactions. Obviously given 2 potential transaction and one is riskier than the other it would never make sense to choose the riskier one unless it offered a premium. The premium offered needs to be correlated to the increased risk.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jul-28-10 12:27 AM
Response to Reply #120
121. Sorry. I'm not buying what you're selling. You're comparing apples to oranges.
Edited on Wed Jul-28-10 12:41 AM by Pithlet
Everyone who enters into contracts has some measure of risk involved. There's the unavoidable risk that you can and are supposed to be trying to mitigate as much as you can with contracts. And then there's the wheeling dealing let's see how much risk I want to take because risk equals profit world of finance. Two different things! That you want to equate the two, and then mix that kind of thing into your dealings with tenants so you can pad your rent? Frankly, I have been being nice. I'm just going to say it now. It's nuts. Most landlords are doing everything they can to avoid the risk. That's why they don't charge extra. They figure they've done all they can and are hoping for the best. They're not playing a game and looking for angles. Yes, it does suck when they default. If they're good at what they do and lucky enough, most have mitigated it well enough so that when it happens it doesn't hurt them too much and they're able to absorb the damages and still come out ahead. In other words, if you think there's a good chance they're going to skip out? Don't rent to them. If not, charge them the fair market price. Charging them more and you're just rationalizing it. You're not playing the stock market.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:27 PM
Response to Reply #22
106. See, heres the prob. You people have ALREADY ACCEPTED the notion ppl w/ bad credit be charged extra.
Edited on Tue Jul-27-10 05:28 PM by Leopolds Ghost
So-called "progressives" who are willing to embrace any idea that is thrown at them. My hometown is considered one of the top 20 most liberal jurisdictions in the country. Guess what a recent debate (a couple years ago) centered on?

WHETHER TENANTS SHOULD BE ALLOWED TO VOTE given that they were "Transients".

and the city's Mayor expressed the INTENTION that the percentage of population who are renters be REDUCED to below HALF because homeowners are "more involved in their community" and paid more taxes (a lie).

Many Dem policy makers live in places like my home town.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:23 AM
Response to Reply #12
25. How do you do that exactly? You don't let a prospective tennant know what the rent might be
Edited on Tue Jul-27-10 12:27 AM by Pithlet
Before you even get to the phase where you're checking out their background and stuff? Man, that would be a red flag for me. I'm excellent tennent material and my credit's good (back in my rental days, I'm a homeowner now) and I'd avoid you like the plague. I'd wonder if you'd try to get me other ways. That just seem underhanded. I wonder how many other good tennants you scare off with that behavior. Edit never mind, I reread and think I misunderstood you and thought you actually were a landlord. Nevermind :)
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 07:37 AM
Response to Reply #25
31. Simple. Rent $1250 + $650 security depost.
Edited on Tue Jul-27-10 08:14 AM by Statistical
(very small print - conditional on credit/criminal/eviction check).

Application requires consent to credit/criminal/eviction check. If check comes back bad either offer is rescinded (that is what I do) or landlord offers higher terms.

It is pretty easy to be a good landlord and a lot of it is perception.

Say I want/need $1250 for a particular property. I will advertise it as $1350 a month with a due date of the 10th. Now if they renter pays by the first I will give them a discount to $1250 a month. I have found I get a lot more on-time (technically ahead of time) payments. The renter feels like it is a "free $100". I never let them know that all I wanted was $1250 and if I get the $1350 it is just extra.

As added bonus and goodwill I give a $200 gift card on December first if all rent payments have been on-time for the year. 10 years 2 properties and only one eviction.
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OneTenthofOnePercent Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 08:34 AM
Response to Reply #25
35. I'd actually never try to "get you".
Edited on Tue Jul-27-10 08:38 AM by OneTenthofOnePercent
If you have to work for renters, then you're either priced too high or have a bad strategy.

As a landlord, dealing with Section 8 housing rental is where it's at.
HUD's FMR for my area is ~$600. When you rent Section 8...
As long as you're priced around the cutoff your property rents VERY fast. People are lined up to get me... I don't have to get them. Also, rent checks come from the government and not flaky renters - so payments are ontime despite renters' daily life dramas. Just count of the fact that you'll have to fix up everything in the house after their gone and you'll be fine.

For non section 8 housing...
Simply state that the rent is negotiable. When they ask explain that factors evident on thier rent application may give them more negotiating power. Good credit, good prior references, renewing a rental agreement, etc. would all allow a discount on the rent. If a prospective renter walks away because they don't like a landlord, screw 'em. If priced right there should be no shortage of other potential renters. Also, Statistical's approach is very good too.

Also, I'd NEVER present myself as the "Landlord". When renting, the idea is to present yourself as a property manager for a larger company that owns a bunch of property. You state that you are simply the manager and liason that works with renters on behalf of some guy that owns a bunch of property. Firslty, this gives renters the impression they are dealing with a larger "business" and this instill confidenc. Secondly, this keeps good separation of relationship between renters and owners.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:47 PM
Response to Reply #35
56. Maybe so. But then again avoiding the "negotiators" served me well.
I never had a problem with any of my landlords screwing me over, and I've known plenty of others who weren't so lucky. I think it's slimey to charge extra. :shrug:
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:00 PM
Response to Reply #35
59. So... people who receive housing assistance will destroy your property and you should
lie to prospective tenants?

That's gold.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:10 PM
Response to Reply #59
62. Someimes the reality of life is ugly. Closing your eyes doesn't change that.
Edited on Tue Jul-27-10 01:45 PM by Statistical
If you rent a section 8 apartment 10 times and 10 of 10 times it requires significant repairs it is prudent to assume that the next occupant will damage the property.

Better safe than sorry. If you put aside more/extra funds to refurbish the unit and they don't damage it (or damage is less than projected) well that is just extra working capital. However if you say "I trust people. This time will be different" and they do end up doing extensive damage you just backed yourself into a corner. Could end up in a cashflow situation and/or need to borrow money to cover damages. Most of the time a landlord starting out isn't going to have a nice low interest line of credit to draw from so that means credit cards.

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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:23 PM
Response to Reply #62
65. Wouldn't putting funds aside just be good practice regardless of who you rent to?
Isn't that why you collect deposits?
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:37 PM
Response to Reply #65
66. Yeah but each property is different.
Edited on Tue Jul-27-10 01:42 PM by Statistical
What works for one type of property isn't going to work for another type.

I rarely have damage that exceeds the amount of the deposit. I would imagine that isn't always the case w/ section 8 housing.
I am not sure if you even get a security deposit.

I think 1/10th was simply indicating a reality of section 8 housing.
Pro: the amount and timeliness of rent is guaranteed (comes from govt)
Con: the amount of damage to property will be greater (need to set aside greater reserve)

Pretending that reality doesn't exist doesn't make you a better landlord it likely will make you an insolvent one. :)
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:25 PM
Response to Reply #66
80. You imagine right? Exactly.
Well, there's what you imagine, and then there's reality. Because 1/10th says it's reality, and you imagine it to be, it is? I don't think so.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:29 PM
Response to Reply #80
82. I have no reason to doubt him. He is basing his view on years of experience as a landlord.
His reason to deceive you on this message board is why?

Whatever.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:34 PM
Response to Reply #82
86. Plenty of racists base their views on years of "experience", too. Guess there's no reason to
Edited on Tue Jul-27-10 02:37 PM by Pithlet
doubt them? It's a prejudiced view. It's ridiculous to give that view the benefit of the doubt. Even for professional reasons.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:36 PM
Response to Reply #86
87. Nothing racist about section 8 occupants damaging the building.
He posted about his personal views. I have no reason to doubt them, and no reason to believe he is posting them only to be prejudiced.

I mean if there was no downside everything would be section 8. Who wouldn't want guaranteed money. Obviously there is a downside to making your property section 8 certified.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:38 PM
Response to Reply #87
88. Not racist. Prejudiced. It's prejudiced to make the assertion that they are more likely
to damage the property.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:39 PM
Response to Reply #88
89. Even if it is a statement based on personal experience?
Edited on Tue Jul-27-10 02:43 PM by Statistical
A statement of fact based on evidence isn't prejudice. Sorry. Just because someone has something bad to say about aynone, anytime, and under any circumstances doesn't make it prejudiced.

If he never rented to any section 8 families and said "I don't want to do section 8 because those people will destroy your property" see that would be prejudiced. Reaching a conclusion based on demonstrated facts after years of being a landlord isn't prejudice.

The whole world isn't rainbows and skittle shitting unicorns.

If you think he is wrong then buy a property, charge no security deposit, make the rent the exact amount of your mortgage (so you have nothing to put aside for future damages) and find out. I wish you the best of luck.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:41 PM
Response to Reply #89
90. Yes. Even if it's based on his years of experience.
Edited on Tue Jul-27-10 02:42 PM by Pithlet
He could be biased in his perception of events. I once heard an HR professional proclaim that American black people were lazier than black people from other countries. Really, should we go ahead and give weight to their years of experience? Or just assume their racism is coloring their perception of things? Someone's professional experience simply isn't evidence that a prejudiced view is true. Not at all. edied for typos
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:48 PM
Response to Reply #90
91. Laziness = subjective. Damage to property = very empirical.
Edited on Tue Jul-27-10 02:50 PM by Statistical
Any good landlord can tell you down to the penny what they paid to rehab a unit. I know I can, mainly for tax reasons. Any costs to rehab a unit increases the "basis" and thus redcues capital gains if/when the unit is sold.

Blacks earn on average less in wages than whites. Is that statement prejudiced?
Hispanics have lower high school graduation rate than Asians. Is that statement prejudiced?

Hardly. both are observable patterns. Empirical evidence supports those statements. They may not be pleasant, they may not even be fair but they certainly are verifiable.

While it is POSSIBLE that he was speaking from a point of prejudice that is a rather strong accusation to make. It isn't GUARANTEED that his claim isn't valid and to claim another member of DU is prejudiced just because you don't like the statement is sad.

Have the last word. I am done.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 03:00 PM
Response to Reply #91
92. Well of course you're done. Because you know that there is a difference
Between stating a fact and stating a prejudice. Because yeah, big difference between X population has lower graduation rate/earns a lower wage, facts that can be easily backed up and may have any number of reasons to explain it, and X population is dirty/messy/lazy, judgments that cannot. If there is a cold, hard statistic that points to a segment of the population being messier, it would be supportable with facts. But it isn't. Pretty simple, really. And thus argument lost. Have a nice day :hi:
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 03:12 PM
Response to Reply #92
94. Well done Pithlet.
I mean, I would understand if there was a statistic showing that Section 8 tenants do more damage, on average, than non-Section 8 tenants. That would be empirical evidence.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 03:32 PM
Response to Reply #94
95. Thanks. Right. Just one person stating that fact just isn't going to cut it.
Edited on Tue Jul-27-10 03:33 PM by Pithlet
There could be any number of reason why one person might have bad experiences, both landlords and tennants, and the expectations on either side can be unreasonable, so it's not a cut and dried subject to begin with. Tennants can be messy, and landlords can be particular about their apartment, and the "mess" and "damage" is really anything but. They don't have a concept of normal wear and tear. I know someone who had a landlord once who wanted to withhold a chunk of the deposit because of things like dust along the ceiling molding. Ran his finger along the top with a white glove, standing on a ladder. Ridiculous. Just utterly unreasonable. What would talking to someone like that on the subject sound like? And then a landlord who tends to be an utter nightmare to deal with might not get as many tennants who leave the place in pristine condition. They might be more likely to get the "I don't give a shit" treatment from the departing tennant. I wouldn't have left it a dump but I might not have gone out of my way to clean as nicely as I did if my landlord had been an ass, and that's me, so there are others who might be more vengefully minded. If they deal with section 8, they might draw the conclusion that that was the factor rather than their own behavior.
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:58 PM
Response to Reply #65
71. Exactly - security deposits, at least in MA, are legally required to be set aside in an account
that the tenant is supposed to receive verification of within 30 days of paying the deposit.
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:57 PM
Response to Reply #62
70. I just think you are stereotyping the poor. I know people who receive Section 8
and their house is a hell of a lot cleaner than mine.

:shrug:
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:00 PM
Response to Reply #70
74. There are exceptions to every rule.
However anyone working in real estate deals with the aggregate.
What is the average amount of damage to a unit? Not in how good of a condition does the best tenant leave the unit.

I don't know I wasn't the person who made the claim but if in the past he has found out that Section 8 units tend to get trashed then it is prudent to assume that and structure finances accordingly.
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:03 PM
Response to Reply #74
77. How statistically more likely are Section 8 rentals to be damaged than
a non-Section 8 rental in the same area?
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:03 PM
Response to Reply #77
78. I don't know I neither own section 8 property nor have any interest in ever doing so. n/t
Edited on Tue Jul-27-10 02:06 PM by Statistical
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:25 PM
Response to Reply #78
81. Well, there you go. n/t
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:34 PM
Response to Reply #78
85. It's kind of hard for me to take something seriously with no evidence...
as I am sure you can understand.
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OneTenthofOnePercent Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 03:54 PM
Response to Reply #77
96. When you pay for something yourself, you're more likely to value it more.
Someone who values something tends to take better care of it. I'm not saying ALL SS8 renters don't value thier home and/or trash them... or anything like that. But it happens alot more in SS8 in my experience than in regular non-SS8 retntal units. It's a Personal assesment based on personal experience. Whether or not you base your beliefs on my experieces doesn't matter to me - Lord knows I'm not basing my actions from your experiences. :shrug:

Is this a quantitave assertaion? No - it's 100% qualitative. But you see it in many sectors of life. Rental cars, rental tools, hotel rooms, spoiled kids not knowing the value of things given to them, etc... I see it everyday. That's just the way the world works.

Furthermore, and more quantitative, when somone in SS8 housing fucks up your house what are you going to do? Legally go after somone who likely has mediocre credit and very little assets to recoup your losses? No. You're SOL because as the saying goes, you can't get blood from a turnip. When someone with good credit and assets in a high priced rental destorys something it's not nearly as difficult to get restitution.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 04:38 PM
Response to Reply #96
99. Why would that apply any more or less to non section 8 renters?
It may be your personal experience. But there could be any number of factors that explain that.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:41 PM
Response to Reply #35
109. SO... HOW many posts on this thread are advice from one member of the Investor class to another?
I guess poor people are no longer assumed to be DUers.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:51 PM
Response to Reply #109
110. I hope you weren't referring to the exchange between him and I
I was definitely not seeking any advice from him, nor am I a member of the investor class.
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Leopolds Ghost Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 05:19 PM
Response to Reply #12
105. Poor people have bad credit. Would you charge a college student lesss rent than a poor person?
Edited on Tue Jul-27-10 05:20 PM by Leopolds Ghost
That's the society we live in and the mentality of many "affluent" progressives.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:29 PM
Response to Reply #105
114. I likely wouldn't accept a college student.
Edited on Tue Jul-27-10 10:55 PM by Statistical
One they do generally have bad credit and that is a potential risk to me. Their income or their families income is secondary to the likelihood of default. Secondly younger people tend to not value the property of others. I was a college student once, I went to parties in college. 30, 40, 50 people in a place. Generally the party house is not well maintained. Now most residences that are rented year after year after year to college students tend to already be low value. The landlord is accepting lower rent and higher risk of damage against a lower value property and a less critical renter.

I have spent a lot of money & time keeping my properties in good condition (and as such can charge higher rent). It would not be a good match.
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ejpoeta Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:09 PM
Response to Original message
3. good! imagine not being able to get a job because you have poor credit.
my husband had to go through a thorough credit and background check before his employer would hire him. but he would be fixing cash registers and atm machines, so i guess it's warranted to a certain degree. he was so worried that his bad credit would keep him from getting the job. luckily he did get hired.
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truebrit71 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:17 PM
Response to Original message
7. Good.
I personally think the the credit bureaus need to investigated and overhauled...there is far too much stuff that has a negative impact on your score, and far too little that takes far too long to improve it..It is rigged..but then..you all knew that, right?

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hamsterjill Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:34 PM
Response to Original message
8. I'm getting a bank loan right now.
The bank ran a credit check, and I got the subsequent letter in the mail explaining my credit score. One of the comments in the "negative" section is that I don't have any installment loans. In other words, my car is paid off, and that is a ding against my credit.

Somehow I would think a paid off car loan should be in a positive column, but it isn't. When you have the foxes guarding the hen house, what can one expect?!

No way should credit reports keep people from getting jobs. I hope it becomes illegal in all 50 states.
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Rob H. Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 05:16 PM
Response to Reply #8
14. Similar thing showed up on my credit report
I got dinged for having a $0 balance on my credit card, iirc. (I'd paid it off a year earlier and had stopped using it entirely.) The credit card industry uses the term "deadbeats" to describe people who don't have any credit card debt because they can't make any money from them.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 08:10 AM
Response to Reply #8
34. There are always negatives provided. It doesn't mean you have bad credit.
I have credit score over 700 and it still shows 3 negatives.

Think of it as "no matter how good you are you could always be better". Here are 3 areas which would make you better.

Now I am not saying you should go out and get a car loan just to have an installment loan on your credit report however all things being the same you and someone else the guy with an installment loan in recent history has a higher score.
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:04 PM
Response to Reply #34
60. The point is, why does having more debt give you a higher score?
I work in bankruptcy law and have studied credit scoring extensively, and it is a racket. In order to increase your score, you have to increase your liability.

People are trapped into playing a bullshit numbers game instead of just living.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:13 PM
Response to Reply #60
63. No to have higher score you need to use credit effectively.
Edited on Tue Jul-27-10 01:13 PM by Statistical
If you aren't extended any credit then you score should not increase. You haven't shown an ability to repay.
If you are extended credit and you show an ability to repay your score should increase.
If you are extended credit and you show an inability to repay your score should decrease.

People try to look at credit as "fair". The goal of a credit score isn't to be "fair" it is simply to use a statistical model to predict likelihood of default on new line of credit. A high score doesn't mean you are "good" and low score doesn't mean you are "bad".

A lower score simply means an increased likelihood to default. Not everyone will default but enough do to validate the model.

That being said I don't think credit scores or credit reports should be used for non-financial transactions (insurance, employment, etc).
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:44 PM
Response to Reply #63
67. Uncommon is absolutely correct
Your credit score can be affected by things other than your ability to pay. Your credit score can even be affected by things like what stores you shop at. Paying your bills on time is certainly not going to hurt. But it isn't everything. Yes, if you're extended credit and show ability to pay, your score should increase. Should being the operative word. Unless you shopped at the wrong stores or lived in the wrong neighborhood, or were unlucky enough to have it happen when the recession hit and credit card companies decided to start slashing everyone's credit lines, therefore reducing your credit/debt ratio. Or having the line outright yanked from you, which is even worse.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:50 PM
Response to Reply #67
68. "Your credit score can even be affected by things like what stores you shop at"
Edited on Tue Jul-27-10 01:56 PM by Statistical
Please explain. The details of purchases are not indicated in credit report. Only credit extended, balances, and payment history.

"or lived in the wrong neighborhood"
Another falsehood. Personal information (name, age, address, phone number, employment, salary) has no contribution to FICO score.

What is NOT in your FICO score:
* Your race, color, religion, national origin, sex and marital status.
* Your age.
* Your salary, occupation, title, employer, date employed or employment history.
* Where you live.
* Any interest rate being charged on a particular credit card or other account.
* Any items reported as child/family support obligations or rental agreements.
* Certain types of inquiries (requests for your credit report).
* Any information not found in your credit report.
* Any information that is not proven to be predictive of future credit performance.
* Whether or not you are participating in a credit counseling of any kind.

http://www.myfico.com/CreditEducation/WhatsNotInYourSco...

"credit card companies decided to start slashing everyone's credit lines, therefore reducing your credit/debt ratio. Or having the line outright yanked from you, which is even worse. "
That is true. The system isn't perfect however generally speaking those with lower credit scores tend to default more often than those with higher scores. Banks use the system despite its imperfection due to that strong correlation.

If scores weren't correlated to default rates nobody would use them.

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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:00 PM
Response to Reply #68
76. Doing business with certain types of companies actually does have the potential to hurt your FICO
score - consumer finance companies are a good example of this. Regardless of your payment history, having dealings with sub-prime lenders can nick your score.

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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:30 PM
Response to Reply #68
83. delete, dupe
Edited on Tue Jul-27-10 02:32 PM by Pithlet
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:30 PM
Response to Reply #68
84. Credit card companies start getting twitchy when they don't like your spending pattern
Edited on Tue Jul-27-10 02:32 PM by Pithlet
This can simply mean shopping too many times at discount stores. Or it's a store that other defaulters tend to shop at, so maybe that means you might be a defaulter, too. Credit card comoanies then reduce your limit or cut you off completely. This affects your FICO. Same thing with living in or moving to a neighborhood where there are a lot of forclosures. This makes them nervous, too. Your debt ratio affects your FICO score. When one credit card company does it to you, chances are your other credit card companies may as well. More dings on your FICO.
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LostinVA Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 03:39 PM
Response to Original message
9. I don't think it should be allowed for car insurance, either
Rip-off.
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Scurrilous Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 04:25 PM
Response to Original message
11. Good news.
:thumbsup:
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guruoo Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 06:53 PM
Response to Original message
15. Employers are appairently sharing information on write-ups ("disciplinary actions") and more..
Edited on Mon Jul-26-10 07:02 PM by guruoo


'SanctionsBase+ is a specialized database Truescreen developed to track administrative and disciplinary actions levied against individuals and businesses by a broad spectrum of federal and state regulatory entities.

A SanctionsBase+ search can reveal more latent background discrepancies, such as applicants who have changed their line of work to hide past professional problems.

Broad spectrum of sources, industries
SanctionsBase+ includes actions from industries ranging from healthcare and financial services to housing and transportation. Key sources include the Office of Foreign Assets Control (OFAC) list of Specially Designated Nationals and Blocked Persons, terrorist watch lists, the General Service Administration (GSA) Exclusion List, the U.S. Department of Commerce, and the FBI.'

http://www.truescreen.com/SolutionsDetail.aspx?ChannelI...
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Commie Pinko Dirtbag Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:06 AM
Response to Reply #15
21. Whoever fires a powerful EMP in their datacenter is my hero. -nt
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lonestarnot Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:08 AM
Response to Reply #15
48. And now they can be sued for intentional infliction of emotional distress.
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Sgent Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 07:02 PM
Response to Original message
16. I hope its not for all jobs
although there is no reason a nurse or construction worker should have their credit held against them, a cashier, banker, accountant, or purchasing agent or manager of those probably should be subject to at least a cursory credit examination.
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Lance_Boyle Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 08:51 AM
Response to Reply #16
36. This I agree with.
If the position for which you are applying has significant financial responsibilities, it makes sense for the employer to examine whether applicants are financially responsible. It's sort of like making sure someone has passed the state Bar before hiring her as a lawyer. But pre-employment credit checks should be banned for *most* jobs.

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JonLP24 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:20 AM
Response to Reply #16
41. I'm sure Madoff had excellent credit
My point with that is I have terrible credit but I'm not a thief. I would never dip steal money from a cashier and I don't believe most people with poor credit would either.
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:22 PM
Response to Reply #16
53. As someone who is still working on rebuilding my credit from being un and under
employed for years after college, I find this offensive.

Just because someone has had financial difficulties at some point does not mean they are thieves. And people with no money problems steal all the time.

This is what references are for.
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Sen. Walter Sobchak Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:20 PM
Response to Reply #16
64. We check for some, not for others.
A credit check for a secretary is a waste of time, but in any sort of financial or legal role around here you get a financial colonoscopy.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:11 AM
Response to Original message
23. Good. I hope all these efforts are successful. n/t
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Hannah Bell Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 03:26 AM
Response to Original message
27. that would be a great reform.
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xchrom Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 06:47 AM
Response to Original message
28. any more it seems that you need a credit check for being alive. nt
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Kalyke Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 09:23 AM
Response to Original message
42. Rep. Steve Cohen is the ONLY decent representative Tennessee has!
That's sad.
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slampoet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:06 AM
Response to Original message
46. There was a segment about a Doctor who ran up $520,000 in student debt, had no trouble getting hired


Sure they did credit checks but not for the important jobs.

Can you imagine the threats to your health from a doctor in that much debt?

I can.
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uncommon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 12:20 PM
Response to Reply #46
52. Undergrad and med school is expensive. I'd be more worried that the doctor isn't being paid enough
to repay that debt without massive stress than about the fact that he incurred the debt in the first place.

Not everyone who wants to be a doctor or a lawyer in this country can afford to go to school without taking out huge loans.
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slampoet Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 03:08 PM
Response to Reply #52
93. But the people in other fields who take out loans ARE judged in ways Doctors and Lawyers Aren't
Edited on Tue Jul-27-10 03:09 PM by slampoet
Also this country doesn't need more Doctors and Lawyers

It needs engineers desperately and those schools are just as expensive.
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MicaelS Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:23 PM
Response to Reply #93
112. Doesn't need more Doctors???
You are wrong. There is a shortage of Primary Care Physicians in this country. Plenty of articles out there if you do the research. Here's a couple:

http://www.nytimes.com/2009/04/27/health/policy/27care....

http://www.washingtonpost.com/wp-dyn/content/article/20...

http://www.newsweek.com/2010/02/25/the-doctor-won-t-see...
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slampoet Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-29-10 08:39 AM
Response to Reply #112
122. Common misconception by people who don't hire doctors for a living like my family does.
Edited on Thu Jul-29-10 08:40 AM by slampoet
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lonestarnot Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:07 AM
Response to Original message
47. Never should have been legal in the first fucking place.
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JohnnyBoots Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 01:54 PM
Response to Original message
69. It should be Illegal. Never, ever trust HR. They are out to get you.
They think that they are untouchable and beyond reproach all the while doing the dirty work for executive level masters. I fucking hate HR.
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CitizenLeft Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:00 PM
Response to Original message
75. wonderful news! Thank you!
:applause:
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Lucian Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 02:04 PM
Response to Original message
79. They should've done this a long time ago.
But I guess it's better late than never. :shrug:
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GreenTea Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 04:43 PM
Response to Original message
100. Left Coast...."Washington, Oregon and Hawaii" - Where's California?
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Corey_Baker08 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jul-27-10 10:46 PM
Response to Original message
116. I Would Most Definately Support Legislation Preventing Employers From Accessing Our Credit Reports..
I look at it like whose business is it if I fell on hard times and was unable to pay my outrageous hospital bills, or whatever a college student like myself has racked up such as a capitol one Credit card in which they raised the interest rates so there was no way I could afford to pay it off completely, yet I am making monthly payments on both!
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Naturyl Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-30-10 05:21 AM
Response to Original message
124. Good. It was always ridiculous.
Employers are out of control in America. We have totally lost sight of the simple fact that employers don't do workers a favor by hiring them, workers do employers a favor by working for them.

Credit never had any business being checked for employment.
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