Comprehensive Credit Checks are an essential part of good hiring practices. Here’s why:
According to a nationwide survey conducted by The Professional Background Screening Association (PBSA) and HR.com, 25% of HR professionals use credit or financial screenings during the hiring process for some positions, while 6% checked the credit of all applicants.
Running a credit check on a potential employee can tell an employer a lot about that person’s integrity and character. A low credit score can indicate financial distress which may indicate a risk of fraud or theft. Numerous late payments can show a lack of organization and responsibility.
A pre-employment credit report can be useful in determining the financial responsibility and dependability of a candidate
AccuSource obtains credit history reports directly from the credit bureau. Information provided includes names and addresses associated with Social Security Number, accounts, bankruptcies, liens, late payments, and child support delinquencies.
What shows up on an Employment Credit Check:
- Identifying information (name, address, SSN, etc.)
- Incurred debt (credit cards, mortgage, car loans, etc.)
- Payment history, including late payments
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Employment Credit Checks & Legal Implications
The use of credit reports for the purpose of employment decisions has changed significantly in recent years due to increased state restrictions. AccuSource provides employers with up-to-date legal compliance information to support informed decision-making.
The Fair Credit Reporting Act (FCRA) sets standards for what an employer can do during the hiring process, including guidelines for the use of credit history information. Below are a few rules employers must follow in regards to the information obtained from a pre-employment credit check:
- The employer must obtain written approval from the applicant
- The report cannot include outdated information
- The applicant must be told if the report is used to make a negative hiring decision
- The applicant has the right to see what is in the report
- The applicant has the right to dispute the information in the report
The Adverse Action Process
If an employer does not hire an applicant because of the information found in a pre-employment credit check, a specific set of actions must be followed per the FCRA. This “Pre-adverse & Adverse Action Process” is explained in our detailed infographic.
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Frequently Asked Questions
What does a pre-employment credit check look like?
Employers running credit checks on potential employees will not receive a traditional credit report like the one a mortgage company might run prior to loaning money. Instead, employers will see a modified version of the applicant’s credit history which includes only basic information, including payment records, amounts owed, and available credit.
This report will omit information which might violate equal employment regulations, such as date of birth and marital status. It will also not show the applicant’s credit score or account numbers.
Does a pre-employment credit check hurt the candidate's credit score?
No. A pre-employment credit check only counts as a “soft inquiry” on one’s credit history so it will not affect the credit score or show up on a credit report.
What information is required to run a background check on an employment candidate?
The scope of employment background screens can vary widely from employer to employer. Even the type of position sought and employer’s industry can impact the breadth of the screening components contained in a specific screening request. The types of services or products contained in each background screening request has a significant bearing on the types of information required to facilitate research.
In standard criminal history background screen, most Consumer Reporting Agencies (CRAs) begin with a social security trace (SST) or address locator search to identify any previous addresses or alias names associated with the applicant. The applicant’s social security number (SSN) is generally required to conduct this type of search. Additionally, applicants are asked to provide their full legal name, date of birth and at least 7 years of address history. The address history (both developed by the SST and applicant-provided) aids in determining the courts searched for potential criminal records. Most criminal records are indexed by the defendant’s name and date of birth. Once a potential record match is located, additional information is sometimes required to confirm the record match.
Employers often request additional services to meet their specific screening needs. These services commonly include verification of employment and education history, verification of professional licenses, personal and professional references, and driving records. Each type of search has its own set of search data required to ensure a quality result. No two employers are completely alike in their program needs and organizational requisites are ever-evolving. For more information on AccuSource’s individualized screening services or an analysis of optimization opportunities, please contact us at firstname.lastname@example.org.
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