If you’re wondering if you should run a credit report on all of your applicants, you’re not alone. While using an applicant’s credit history during the hiring process is under a great deal of scrutiny, many employers consider an applicant’s credit report to be an important piece of the background check process.
In fact, a 2012 Society of Human Resource Management (SHRM) survey found that of all of the organizations they polled, 47 percent of them said they conduct credit background checks on at least some of their job applicants.
At Clarifacts, we believe there is still a legitimate place for credit reports during the hiring process if approached cautiously, utilized legally (in accordance with the Fair Credit Reporting Act) and evaluated appropriately. An employment credit report provides a profile of your applicant’s personal financial management history, including indebtedness, payment history and public record information such as tax liens, judgments and bankruptcies.
Credit reports obtained for employment purposes do not include a FICO score (nor should they). You are not granting credit, but rather identifying poor fiscal habits such as living beyond one’s means or racking up unnecessary debt with no immediate plan of repayment.
Employers should always consult legal counsel regarding when and what information can be used in evaluating an applicant, as well as for assistance in setting up internal policies and procedures to ensure that the use of credit information is legal, relevant and fair.
If you decide to obtain an applicant’s credit history during the employment background screening process, these “two do’s” can help you stay compliant with regulations and get the most out of using credit reports in the hiring process.