Overview
Your typical applicant screening process likely includes a criminal history check, an identity verification, a drug test, an education history and employment verification, and a work authorization. But have you ever conducted an employment credit report check?
A financial background check can give you a good idea about whether someone is prone to monetary mismanagement and will give you peace of mind that you’re picking the right candidate to handle money matters. Here, we will go over the importance of this process, when it’s necessary and appropriate to check an applicant’s credit report, what’s included in the check, and how you can do so according to compliance regulations.
When Do You Need to Run an Employment Credit Check?
It’s important to note that you don’t need to check credit reports for every job position. An employment credit report isn’t a piece of useful information on someone whose credit would have no impact on their job, such as a custodian, an auto technician, a teacher, or a nurse.
They are useful, however, when hiring for high-risk positions that involve money handling, sensitive data, other confidential information, or any other jobs that require security clearance. Some examples of jobs that need a credit check for employment include casino workers, lawyers, personal accountants, law enforcement personnel, government employees, prison workers, and military officials.
Why Is an Employment Credit Check Important?
A candidate can tell you how good they are with money until they’re blue in the face, but their credit report can prove it. An applicant’s credit report is a good indicator of how responsible and reliable they are — especially with money. If an employment credit report check comes back showing high amounts of debt, bankruptcy, or general financial turmoil, the candidate may be more likely to commit theft or fraud against consumers or your company as a whole.
When it comes down to it, checking a credit report is a matter of protecting your organization from the risk of financial losses, lawsuits, and/or embezzlement. Having this information will ultimately help you find the best fit for the job.
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What Can You Learn From an Applicant Credit Check?
To be clear, a pre-employment credit check will not reveal an applicant’s credit score but rather a summary of their payment history and debt.
An applicant credit check will include:
- SSN
- Work history
- Past and present addresses
- Names currently and previously used
- Bankruptcy filings
- Payments in collections
- Credit inquiries
- Credit-to-debt ratio
- Liens and judgments
- Payment patterns
Take Credit Reports With a Grain of Salt
As you make hiring decisions, remember that credit reports do not paint a complete picture of your applicant or predict exactly how they will perform on the job. You don’t know the story behind the numbers or the life circumstances leading up to a person’s debt, so it’s a good idea to give them a chance to explain their poor credit and to take all aspects of a background check, interview, and resume into equal consideration. If you don’t want to rely on gut instinct, you can always check with character references or past employers to get clarification on any concerns you may have.
How to Maintain Credit Background Check Compliance
The Fair Credit Reporting Act (FCRA) has made it illegal to pull an applicant’s credit report without their knowledge. You must obtain written consent from your candidate(s) before seeking confidential information about their finances. Employers are also obligated to follow the FCRA adverse action steps when making hiring decisions based on credit.
In some states, it is now illegal to use credit reports to make employment determinations. According to the National Law Review, these 11 states include California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. There are also limitations on the types of jobs you can pull credit reports for. Usually, you can only pull credit history on those applying to work in the finance industry, be a supervisor, handle large sums of money, or access trade secrets.
With so much red tape around the credit report background screening process, your safest bet is to work with a third-party screening service like VICTIG that can mitigate your risk of noncompliance and free up your time.
How to Get a Pre-Employment Credit Check
After getting your candidate’s written permission, you can register an account with one of the three major credit reporting agencies (Equifax, Experian, and TransUnion). You’ll need the applicant’s full legal name, Social Security number, and address. There’s usually a fee for running the report as well, which can be anywhere from $8 to $20.
You can also save time and hassle by rolling an employment credit check into a comprehensive background check with VICTIG. Our experienced team is eager and ready to help you start making more informed hiring decisions by providing you with the most current and accurate information available. Get started with us today!
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