Blog Post: Employee Background Checks and the Credit Report

Many questions can be answered about your candidate’s financial history through the use of credit reports. Such as, if they have incurred debt with no intention of paying it back, if they are currently paying all of their bills on time and if they have shown a history of making payments on time.  Credit reports can also indicate if a candidate has had accounts turned over for collection or debts charged off and, if so, how the situation was resolved.

Not all employers need to examine a candidate's credit history, but it is well advised for certain positions, particularly those in the accounting and finance industries, that require a person who has demonstrated a history of financial stability and the ability to manage finances. It is also prudent for those positions that have access to large amounts of cash, expensive equipment or materials, company credit cards and confidential company information.

It would be safe to say that most people have experienced at least some financial difficulties in their lifetime. So, an applicant with negative marks on their credit report should not automatically be disqualified for employment. In fact, employers should avoid making negative hiring decisions on information that is from years past or that is relatively minor.

The Fair Credit Reporting Act has specific compliance requirements and restrictions relating to the use of credit reports. Employers should always consult legal counsel regarding what data can be used in evaluating a candidate and should have polices and procedures in place to ensure that the use of credit information is both relevant and fair. 

Kevin Klimas is the founder and president of Clarifacts Inc, a privately held corporation focused exclusively on employment background screening services.  Clarifacts provides nationwide service across a variety of industries including healthcare, staffing, call center and non-profit just to name a few, with clients ranging from Fortune 500 companies to sole proprietorships.