Using a Credit Report For Employee Screening

A connection exists between a person’s credit history and the manner in which they handle their social and job-related responsibilities. While having a poor credit history doesn’t necessarily mean an employee will be more prone to commit an act of theft or fraud, it’s still a useful gauge for employee screening procedures. Today, employers routinely request a credit report for each job applicant. Below, you’ll discover 3 reasons why you should do the same when hiring personnel and how to comply with the Fair Credit Reporting Act (FCRA).

3 Reasons To Use A Credit Report For Screening

#1 – Measures Trustworthiness

If an applicant’s credit report shows that she is habitually late on payments and has several accounts in arrears, that may be an indication of her trustworthiness and reliability. If the credit report reflects a large debt balance, she may be tempted to steal from the business.

#2 – Reduces The Applicant Pool

If the position for which you need an employee places that worker near cash or other valuables, you may decide upfront that a poor credit history will disqualify a candidate. By communicating this to applicants, you can discourage many of them from pursuing the position. That slims the applicant pool, saving your both time and effort.

#3 – Boosts Workplace Productivity

Weeding out job candidates with poor credit histories can increase the overall productivity of your workforce. It encourages a raised level of honesty between employees and the company. Plus, doing so also helps limit the likelihood of theft, fraud, or other activities that can disrupt daily operations.

Applicants’ Rights And The FCRA

In order to access a credit report on potential employees, you need to get their written permission. If you don’t receive permission, but still access an applicant’s credit history, she can sue your company for breach of privacy. Once you receive permission and access a candidate’s credit report, take care to not use a listed bankruptcy for reasons of disqualification. Doing so is an FCRA violation and your company can be sued. If you decide against hiring an applicant due to items listed on her credit report, you must let her know. In such cases, you’re legally required to communicate the action you’re taking and your reason for taking it.

Credit Report Compliance For Employers

If you, as the employer, neglect to comply with the FCRA, a job candidate can choose to sue your company in federal court. If they win their case, your company may have to pay damages along with the candidate’s legal fees. In some cases, the candidate can sue for punitive damages (though this typically happens only when the violations are deemed deliberate). If your company’s violations are considered egregious, the FTC and even the state may file a lawsuit.

Using credit history as a measure of whether an employee will become a valuable asset to your company is a mixed art. It’s not conclusive. That being said, there are clear advantages to doing so. The key is to respect your job applicants’ privacy rights and comply with the FCRA when accessing their credit reports.

If doing exhaustive employment background checks is beyond the reach of your company’s resources, consider hiring a professional service to do it for you. A dependable employee screening service will include an applicant’s credit history as part of their investigation.