The Help You Need to Sort Out the Credit Bums

by Garland M Baker on March 27, 2006

For employers, homebuyers and homeowners

Foreigners and expats here have a tool to check out potential employees, contractors, domestics and even real estate brokers and other business associates.

And they really need these tools.

As an example, 75 percent of the applicants to a recent clerical job opening in Costa Rica had serious credit problems. Employers need to know this information because many believe that individuals up to their eyeballs in debt are more likely to steal on the job.

The tool is the six credit reporting agencies in Costa Rica.

Over the past 14 years, Costa Rican companies have used the information found in these databases to make credit decisions much like in the United States. However here, only bad credit is reported, unlike the United States where good credit is calculated into a FICO score. FICO is a mathematical model created by the Experian credit bureau as a tool for lenders to use in evaluating the risk associated with lending money.

More recently, companies like Cero Riesgo are compiling information for employment purposes. In addition to bad credit and other judicial problems, they can provide complete work evaluations for employers upon request. They do this by calling each employer in a person’s employment history, as reported by the Caja Costarricense de Seguro Social, the social security administration, and filling out an evaluation questionnaire over the telephone.

However, potential job applicants have so much bad credit and other legal problems it is hard for an employer to find someone without bad credit.

The barrage of credit cards into the Costa Rican market over the past 20 years, and the exorbitant interest rates on them, have pushed common people into debtors’ hell. Costa Ricans also have a tendency to avoid worrying about tomorrow.

Credit card companies insist their interest rates are not usurious but are required because of the high number of bad debts. Judges in the civil courts loudly complain they are the unpaid workers of credit card companies because 80 percent of collection cases in the courts are due to credit cards.

Credit reporting companies have had an uphill climb in Costa Rica to obtain the information they require to provide accurate information. They have fought hard in court to obtain all the data they can from every thinkable resource of personal information, including but not limited to, phone records, light and water bill data, vehicles and property registrations, and drivers license records and photographs to add to their databases.

Public interest groups fight hard to keep financial information private. However, the constitutional court’s general position is that any information existing in the public realm should be available to all in the interest of open and free commerce. Based on this, reporting agencies purchase hard data or online instant access to public entities like the Registo Nacional and the Ministerio de Obras Públicas y Transporte, the transportation ministry, along with other institutions to fill their data banks.

For a potential employee or a borrower, this means one’s dirty laundry, as in bad credit, legal problems, and employment history is available for everyone to see. Everyday, more and more data is added, and privacy is extinguished. Each Costa Rican citizen has a unique cédula number that makes checking easy.

For the lender or the newly arrived property buyer, this information is invaluable for making good decisions. It is interesting that as more information is available, interest rates do not appear to be declining to reflect reduced risk.

For the employer, warning flags pop up when investigating job applicants if bad credit is habitual. The flags reflect potential employees’ inability to keep their life in order meaning they probably will not keep their job in order either.

Serious credit problems, jumping from job to job, and legal problems send up warning signs like fireworks that a person may steal. Employee theft — pilfering, larceny and embezzlement, to name a few, comes under the umbrella of fraud. However defined, the result is the same: businesses suffer a loss because an employee unlawfully takes something from an employer.

On average, it takes 18 months for an employer to catch an employee who is stealing. Most employee theft either comes to the attention of the employer by another employee or is found out by accident.

According to the theory of Dr. Donald R. Cressey called the “Fraud Triangle” there are three factors — each a leg of the triangle — that, when combined, lead people to commit fraud in the workplace.

One leg is an individual’s financial problems. The second leg is this individual’s perception that there exists, at the place of business, an opportunity to resolve the financial problem without getting caught. The third leg is the individual’s ability to rationalize or justify the intended illegal action.

The key ways to prevent employee theft is through screening job applicants thoroughly before hiring them in the first place. Background checks should be performed and should include a check on criminal history, civil history, driver’s license violations, as well as verification of education, past employment (including reasons for leaving), and references.

It is not expensive for even small companies to use credit-reporting services in Costa Rica. Monthly service fees are as little as 5,000 colons (less than $10) that include a number of reports as part of the package.

Homebuyers, property sellers and others can use these services to check out the financial standing of professionals they might hire to help them. In the case of some professionals, like lawyers and notaries, the various professional groups also maintain records showing prior misconduct or complaints.

In the case of the recent stack of job applications, of some 20 different names and cédula numbers, 15 had three or more legal actions as a result of credit card problems.

Who are the agencies?

There are the six credit reporting agencies in Costa Rica: Teletec is the oldest and most widely used. It was founded in 1992. Cero Riesgo S.A. is catching up fast with more information for employment related decisions. is more for Central America than Costa Rica.

Cero Riesgo S.A.
InfoCrédito (Teletec)
Protectora de Crédito Comercial S.A.
Trans Union Costa Rica:, founded in Guatemala and working with ChoicePoint of the United States, has information on over 18 million Central Americans. Worldwide intelligence agencies use the databases of regularly.

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