Part of the hiring process is running various types of background checks. While some check for employment and education history other types of background checks look for different types of information. An employment credit check shows an applicant’s credit history. If you’ve ever viewed your own credit history an employment credit check will have much of the same information but there are a few differences.
An employment credit check does not include a credit score, account numbers, the applicant’s age, material status, or other protected information. It also will not show any other soft inquiries that may have been made by other companies. This is because when a person is looking for work several companies may be interested and running various background checks simultaneously. What it does show is a list of account payment history, credit limits, and existing debt.
Why You Would Want This Information
There are many practical reasons you’d want to view a potential employee’s credit report. This is mainly done in industries where such information would be considered relevant to the job and its associated duties. This can include jobs where cash is handled, customer account management, various finance jobs, the banking industry, jobs that oversee company purchase accounts, and more. There are several things a credit report can tell you as it relates to a person’s financial management traits.
Overall a lack of financial responsibility and various bad habits can make someone a bad fit in a job where those traits are a necessity for proper daily business activity. An overabundance of late payments may indicate someone who is disorganized or is not consistent in following agreed-upon payment schedules. A high amount of debt or maxed-out lines of credit can indicate a lack of strategic thinking or financial distress. While some people are certainly able to separate work skills from their private life an abundance of red flags on a credit report can be an area of concern and should be carefully considered.
The Legal Steps Of Obtaining a Credit Report
When acquiring a credit report for a potential hire there are several steps you must follow to comply with federal law. The first of these is you must acquire written permission from the applicant to view their credit history. This can be obtained through a permission form the applicant signs and dates. Second, you have to offer a copy of the applicant’s consumer rights and a copy of the credit report itself. They are not required to accept, but the option has to be there if they wish to. Finally, the applicant has a period of time (typically three to five business days) to dispute anything found in their credit history. If any type of negative action is taken due to items found in a credit report you must notify the applicant in writing.
Another note of consideration is that not every state allows the use of credit reports during the hiring process. Always check with your local government to ensure that the actions you’re taking are covered by local law. Note that even in states where credit checks are protected you can still request such information in specific circumstances or if the check is relevant to the duties of the job, such as in the financial industry.
A credit check can be an essential part of the hiring process ensuring that the people you hire can be trusted with privileged financial information, access to accounts, and access to company banking information and credit. The key reason most businesses perform such checks is for the safety of not just their customers but other employees. You want to be certain anyone you hire can be trusted and work well with your existing team.