Income for Life

Bad credit could cost you a job

There are some interesting stories creeping up online about job applicants being turned down because of their credit histories, and even one recent article about people losing jobs they already have.

According to an article on Cleveland.com, 67 people have been suspended, fired or will be fired from their jobs at the United States federal government's Defense Finance and Accouting Service because of their poor credit reports.

The U.S. Government, trillions and trillions of dollars in debt itself, apparently has rules about its employees having shaky credit. If you're having financial difficulties, you're not apparently no allowed to have a job that has access to financial information. A couple of Ohio lawmakers are going to battle for the 67 affected workers at the Cleveland DFAS, but it might take a rule change to get those jobs back.

As you can probably imagine, in the current financial climate we live in, a rule like this is probably going to affect more people than it has in the past. And it's not just federal employees who have to worry about it.

A recent article in the Baltimore Sun reported that, according to the Society of Human Resource Management, 60 percent of employers used credit reports to help screen job applicants. In the article, one man says he has been turned down for eight jobs at companies that pulled his credit report.

It appears to be a vicious cycle -- lose one job because of the economy, fall behind on your bills, then struggle finding a new job BECAUSE you fell behind on your bills. Fair or not, that appears to be the reality of the situation right now, which should tell you how important it is to keep your credit score up.

Employers argue that the practice of checking job applicants' credit gives them a screening tool that shows them how responsible a person is with finances. There is also some belief that those with poor credit are more likely to commit fraud or theft at a company at which they hold a position that entails the handling of money. According to the Sun article, that might not just mean paychecks for the U.S. Defense Department -- it may include waiting tables at a restaurant.

Using a credit report to say one person is likely to be more dishonest than the next hardly seems scientific -- and hardly seems legal -- and, as the Sun article points out, one's credit card payment history probably doesn't say much about his or her ability to perform the job. In fact, there are efforts in a good number of states to outlaw the practice of companies using credit reports to deny applicants.

Whether or not it's a fair practice, and whether lawmakers' efforts to change things is effective, it is important to realize how impactful your credit score is now a days. It influences the interest rates you pay on loans, influences the rates of insurance you pay -- and now can impact your income as it relates to your job.  

How will we be judged?

The passage of the Health Reform Bill in the U.S. House of Representatives on Sunday March 21 got me thinking about a quote I've heard a few times. A wise man once said "Every society is judged by how it treats its least fortunate amongst them."

You have to think this is one of the things that spurred lawmakers to cast votes in favor of the bill; it paves the way for 32 million Americans who don't have health insurance to get it. Some would argue that if a society is going to be judged by how it treats its least fortunate, one of the things it might do is provide them with access to health care.

Of course, Americans are deeply divided on the issue. And 25, 50, maybe 100 years from now, history books will support one of the two sides. They'll either say "Some people were actually opposed to this great thing," or they'll say "What were they thinking?"

Hindsight is always 20/20, of course, but as historic as the reform bill was -- and as desperate as the president and his party want it to be their legacy -- it won't be the sole thing our society is judged upon.

It's going to shape history, sure, but so are a lot of things that we as a society are doing right now.

America is fighting two wars. It's fighting a horrifically high unemployment rate. It's fighting the perception that the Wall St. bankers who fueled this recession were undeservedly rescued by the government, which in this case might be judged by how it treated the MOST fortunate amongst them.

We're living in a time when obesity and diet-related health issues are a real problem and are not adequately addressed by the same government that just passed a trillion-dollar measure aimed at helping poor people get healthier.

We have an aging population that will continue to need our care. We have homeowners facing the prospect of losing their homes. We have a mountain of debt, both as individuals and as a nation. We have school systems that can't afford to provide a high standard of education for our children.

Look around, and sometimes it's difficult to determine who exactly are the "least fortunate."

Access to health care for the poor is certainly a noble goal. If we can raise millions of dollars for Haiti relief in a matter of weeks, we should be able to show compassion for those right here among us that have it worse than we do.

But it's hard to look at how passionate the politicians were over this issue and not wonder why they can't be as passionate or as driven about the other things that will shape U.S. history at this critical juncture in time.

This bill will provide health care to about 15 percent of the population that currently doesn't have it. It was passed despite polls that showed more than half of Americans were against it. It took commitment, drive and a ton of energy to get it passed.

What if politicians showed that kind of commitment, drive and energy on things that would help EVERYONE prosper?

Prosperity for everyone -- now THAT would be something a society could be proud to be judged upon.

Up off the ground

Talking to an experience real estate investor last week, I heard a pretty good quote from him. He said: "The worst part about falling is seeing the ground coming towards you. Once you hit it, you can assess the damage, get up and make repairs."

That's a pretty good perspective, and it gives us several things to think about.

First, on an individual level, think about how true this is. Until you hit the ground, you have no idea how bad the fall is. You don't know what your injuries are, how quickly you can bounce back up, or what you're going to do next. Yet the fear of falling, that dread of the ground rising to meet our bodies, is sometimes so strong that we never make it to the point of assessment, getting up or mending.

If you've been a real estate investor over the past few years, you've probably stumbled. Maybe the value of your investment properties has declined; maybe the economy has made it more difficult to keep quality tenants; maybe you can't refinance properties you thought you would have by now.

That's OK. It's happened to all of us. Now that we've fallen, though, the scary hard part is over. Now it's time to get up, dust ourselves off and mend what is broken.

This is what gets me thinking about the U.S. government's role in the economic crisis. It's easy to wonder if the powers that be are delaying the inevitable fall, and therefore putting off the dusting off and mending.

Tax credits; the purchase of banks' bad assets; loan modifications; short sale incentives -- don't these all seem to be ways to merely delay the fall? Do we really have any idea how badly off banks are right now? Do we have any idea how many homeowners are REALLY facing foreclosure? Do we know if we've hit kind of a stabilization in home values? If not, are they going to go up or down? How long will interest rates remain this low?

I'm not saying the government was wrong in propping up the housing market in the U.S.; it was probably necessary, and it helped prevent the world economy from collapsing further than it did. But now it seems as though the government and real estate might just be stumbling around, arms around each other, trying to avoid the scary but inevitable fall.

I hope I'm wrong. But if I'm right, then this spring when the Fed stops buying banks' bad mortgage-backed securities, the tax credit expires and interest rates start to rise, then we could finally hit the ground.

That's probably a good thing. It's been coming up toward us for a long time. It might be time to hit it, assess the damage, get up and then start mending. 

Smaller refunds aren't necessarily a bad thing

Over the past couple of weeks, I've had several people I know mention to me that they were surprised that their federal income tax refunds were considerably smaller than they had anticipated. I get the feeling that some of them, probably like many Americans, count on getting a nice chunk of change back on their tax returns.

Personally, I believe getting a big refund back is a mistake. It means you've overpaid your taxes throughout the year, essentially giving the IRS an interest-free loan on your money. With the power of compounding interest, it makes more sense to take the money during the year in your paycheck -- even if you put it in a low-interest money market account, you're ahead.

But I realize that's not for everyone. Some people use their overpayment of taxes as a forced savings tool. They pay extra taxes throughout the year because they'd spend the money otherwise. If people lack the discipline to invest or save the money, or pay down debt throughout the year, than this is a better strategy than, say, taking the extra money and spending it on "toys."

I am consistently amazed that the average American carries credit card debt, yet also overpays taxes in order to get a once-a-year windfall. If they'd change their witholdings to get the money in their checks, they could consistently chip away at high-interest credit card balances, and/or have more money in their pockets each month so that they could avoid buying things on credit.

But back to the original issue. People have remarked that their refunds are smaller.

One of the reasons is the Making Work Pay tax credit. Remember how a couple of years ago, we got stimulus checks in the mail? That was the government's way of trying to jump-start the economy by giving us "extra" money to spend.

Last year, the Making Work Pay credit gave Americans that extra money in their pay checks. If you're single and earning a pay check, chances are your employer's witholding tables were adjusted to pay $400 less in taxes throughout the year. A married couple would have gotten a total of $800 back in their pay checks.

Paying less tax throughout the year means getting less money back when you file your return, just as if you had adjusted your own witholding on a W-4 to get back less at the end of the year. The government simply did it for you.

This credit is also in place for 2010, so be prepared to again pay $400 less per person during the year in taxes and get back less on your refund. Your pay checks might change slightly this year, as the credit is spread over 12 months, rather than the nine months it covered last year, but the end amount should be the same.

If you're one of those people who need the IRS as a forced savings plan, you will have to adjust your W-4 witholding if you want to get a bigger refund next year. If you are more disciplined, remember that you will again have "extra" money in your pay checks throughout the year to invest, save or pay down debt.

Remember, a smaller refund isn't necessarily a bad thing.

Are you ever tempted to just unplug?

As you read this blog post, can you think back to the time when you didn't know what a "blog" was? Can you remember your life before email? It seems hard to imagine a world without these things, but in reality, it wasn't all that long ago.

In fact, if you're upwards of 35 or so, you probably lived at least half your life without being plugged into the Internet. Now, however, it seems as though we're always plugged in.

We went from having a computer at work to one at work AND home, then to a laptop that we can take everywhere. We went from big, expensive mobile phones to small, relatively inexpensive mobile "smart" phones in about 20  short years. In less than one generation, we became totally plugged in.

Twenty-four hour news channels. Instant news via Websites. News alerts that come to our phones. Twitter feeds, RSS feeds, Facebook posts, and more. A recent Associated Press article says that 26 percent of us get news via our phones. And 46 percent of respondents to the Pew survey that determined that statistic also report that they use up to six different types of media per day.

Are you ever tempted to just "unplug?"

You know, turn the phone off? Don't boot up the computer or turn on the TV? Spend a day or a weekend not attached to a phone, a wireless connection or a satellite signal?  Could you do it? Could you completely un-tether yourself from anything with a cord?

If you've ever had the power go out at your house for an extended period of time, you know that it's difficult to do. No Internet, TV, movies, etc. -- it's hard to know what to do with yourself. It's unfortunate, really. Because chances are, your parents -- again, just one generation ago -- had no problem living in an unplugged world most of the time. We can't seem to do it for a few hours!

But wouldn't it be fun to try? Could you spend a weekend "unplugged?" And I'm not talking about a weekend away. I mean a weekend at home.

Poring through the newspaper for your news. Reading a book instead of watching TV. Not answering the phone, checking email or any of that stuff. Playing board games with your kids or cards with your significant other. Clean the house without the iPod stuck into your ears, or cook a meal without that DVD playing in the other room to keep your kids out of the kitchen.

Could you do it?