The hiring process can sometimes feel like an intricate combination of factors. Understanding how these factors work together is crucial to the hiring process. It is important to remember that the employees you are bringing on today will help to define your company tomorrow. Keep reading to find out why you should be concerned with credit reports in your hiring process. 

Why Should Employers Check Credit Reports?

The pre-employment credit report is a relatively new component in the hiring process. In decades past, the credit report was never a factor in the hiring process. In fact, credit reports themselves were not in use until the 1950’s. Today, however, the credit report is an essential part of who someone is. The credit report can tell an employer a great deal about an individual. 

One of the most obvious things the credit report can reveal is how a person interacts with money. This is relevant if you are hiring someone who will be interacting with money in your company. The way a person interacts with their own money is an excellent indicator of how they will interact with other people’s money. If the credit report reveals that this individual is unstable in money behavior, it could be a red flag that they are not well qualified for a financial position. 

The credit report is also a great way to verify identification and residence. If someone has conflicting or misleading information on their credit report, it could indicate that this individual has not been truthful and upfront concerning their identity. The credit report can even be helpful in establishing if someone is a legal citizen of this country or not. 

What You Will Not See

When an employer conducts a pre-employment credit check, they usually will not be able to see a person’s credit score. The pre-employment credit check is intended to give an employer verification of a person’s identity first and foremost, and then beyond that, it is intended to help them get a snapshot of how this person interacts with their own finances. The actual credit score would be irrelevant. For this reason, the credit score is usually not visible. 

Other Considerations 

The credit report can also indicate to a potential employer if a job candidate is in financial distress. Severe financial distress can sometimes be a trigger for poor decision-making in the near future. If you will be hiring for a financial position, you want to carefully consider whether or not financial distress could cloud the individual’s character and decision-making ability. Even if someone has successfully passed a criminal background check, financial distress could lead them to make poor decisions which could lead to illegal activity. 

Employers should also consider that they need express written permission to conduct this type of check on a future employee. You cannot check a job applicant’s credit report without their permission. The job applicant is protected under the Fair Credit Reporting Act. If you run credit checks on future employees without their consent you could be held liable. 

The last thing you should consider is that a credit check should be pretty far down on your list of qualifiers for job positions. Most employers do not pull a credit report unless they have pretty much already decided to hire someone. Unless you see some distinct red flags in the credit report, it is a good idea to use other factors in your hiring process. 

The pre-employment credit report is the only one-way employers can screen their future job applicants. Be sure to use credit reports in a fair way during the hiring process.