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    Wall Street Journal: Next Frontier in Credit Scores: Predicting Personal Behavior

    In the last year, there has been increasing focus on the use of credit checks of job applicants by employers. In February, the Associated Press reported that Nebraska was considering legislation to ban these pre-employment credit checks: LB113, an relating to the Nebraska Fair Employment Practice Act, and LB530, the Employee Credit Privacy Act. The District of Columbia was considering legislation that would restrict the use of credit reports by employers. Illinois and Oregon have passed similar laws. In March, the Oregon governor signed a law that protects job applicants’ privacy when it comes to their credit reports. In August, Illinois Gov. Quinn signed House Bill 4658 (pdf), which creates the Employee Credit Privacy Act. The law bans employers from checking the credit of job applicants, with some exceptions.

    Now, the Wall Street Journal reports on how new types of credit scores can affect individuals’ privacy.

    Experian PLC, the credit-report giant, recently introduced an Income Insight score, designed to estimate the income of a credit-card applicant based on the applicant’s credit history. Another Experian score attempts to gauge the odds that a consumer will file for bankruptcy. […]

    The proliferation of “scores” highlights the widening trade in personal information, which is already fueling public concern about diminishing personal privacy. It also shows how data collected for one purpose, such as credit histories, are increasingly used for others. […]

    Use of credit-related data is regulated by a federal law that gives people the right to see and correct information about them. But those provisions may not apply to some new products.

    Experian says the provisions don’t apply to Income Insight because it produces only an estimated income, and card issuers can’t use the estimate alone to deny an applicant.

    Consumer groups and privacy advocates say the scores can tag people with hard-to-escape labels, often based on flawed data or little science. “People make character judgments about you based on that FICO credit score that may or may not be accurate,” said Chad Gentry of Community Credit Counseling Services in Denver, a nonprofit consumer adviser. “It’s not the real world. It’s just a computer program.”

    One flashpoint in these debates is employers’ use of credit histories to check out potential hires. A 2003 study by researchers at Eastern Kentucky University found no correlation between credit scores and employees’ job performance, or likelihood of being fired. […]

    Use of credit histories also raises concerns about racial discrimination, because studies show blacks and Hispanics, on average, have lower credit scores than non-Hispanic whites. The U.S. Equal Employment Opportunity Commission filed suit last December against the Kaplan Higher Education unit of Washington Post Co., claiming it discriminated against black employees and applicants by using credit-based screens that were “not job-related.”

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