Why do employers check credit?

  •  01/28/2018
  • By Andrea Collatz
  •  Credit history , Employer , Infographics

Credit reports have a major impact on many of the things we do and purchase, from mortgage rates to buying a car. Credit history can also be a factor in the hiring process. Why? Employers are concerned with assessing a job candidate’s aptitude in a multitude of ways, and the information included on a credit report can provide important insight.  

In a 2012 study, the Society for Human Resource Management revealed that 47 percent of U.S. companies conduct credit background checks.

Nearly ½ of employers run credit background checksNearly ½ of employers run credit background checks

As an employer, what do you stand to gain from the credit reports of job applicants? The opportunity to spot warning signs in advance. Credit reports may indicate whether a job applicant will put your business at risk.

If the position you’re looking to fill requires an employee to deal with sensitive financial information, handle company money, or access important financial data, it’s crucial to hire someone reliable and responsible—your business may depend on it.

Small businesses have not always had easy access to credit-based tools. Luckily, TransUnion ShareAble Hires offers small business owners easy and secure access to their applicant’s credit report within minutes.

Below we’ll review more specifically why and how employers check job applicant credit. 

why an employer conducts credit check for job applicantswhy an employer conducts credit check for job applicants

Get Deeper Insights into Your Applicant’s Financial Situation

Reviewing your applicant’s credit history gives deeper insight into how they handle their financial obligations. A credit report lists information about an individual’s credit accounts, both past and present. It will detail the accounts in good standing, which includes the amount due and note whether payments have been made on time. The report also lists those accounts with late payments, or debts that have been sent to collections services.  Credit reports may also include information on:

  • Bankruptcies
  • Collection accounts
  • Recent employment history*

With a ShareAble Hires credit check, you’ll receive:

  • Identity Verification

Each ShareAble Hires screening package includes automatic identity verification to ensure your applicant is who they say they are. The credit report will also list fraud indicators, such as mismatched information.

  • Summary of active accounts and credit lines

In the tradeline summary of active accounts and lines of credits, you’ll get a look at your job applicant’s active accounts, including credit cards, student loans, and auto loans.

  • Payment history

The tradeline summary will also reveal if your candidate is timely with payments, how much they pay toward their balances, and their spending behaviors.

  • Recent employment history

If the applicant has reported the name of their employer to creditors or lenders in the past, that employment history may appear on their credit report.  

*Not all employment history may be available or contained within a credit report.

Can Employers Check Credit History in Every State?

The use of consumer credit information is subject to federal and state laws regarding use of such information during the hiring process.

Certain states limit the use of credit reports for pre-employment screening purposes. There are at least currently 11 states that have passed laws to restrict the way credit reports can be used in employment decisions. In California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington, regulations regarding the use of credit reports can impact the way employers utilize this information.  In addition, some cities, such as Chicago and New York, have passed laws that that also impact the way employers use this information.

Where permissible by both state and federal law, ShareAble Hires pre-employment screening services can help you gather the insight you need to make the right hire, each and every time.

We provide thorough pre-employment credit checks with data delivered direct from TransUnion, a trusted credit reporting agency. Our reports meet FCRA regulations and comply with the latest laws and regulations governing consumer reporting agencies.

how do employers benefit from checking applicant credit reportshow do employers benefit from checking applicant credit reports

How Do Employers Benefit from Pre-Employment Credit Checks?

Knowing as much as possible about an applicant’s background helps you determine whether they meet your hiring criteria. Interviewing a potential candidate is a great way to understand their job experience and whether they’ll fit in with your business culture. But verifying records and using objective data to inform hiring decisions is essential to protecting your company in the long-run.

While criminal histories and identity verification are important, credit checks can be extremely relevant in positions that deal with finances. ShareAble Hires credit checks offer a comprehensive view of a job candidate’s financial track record, which will help you determine how they handle their financial obligations.

The information on a credit report can help you evaluate whether or not a person is:

  • responsible
  • trustworthy
  • dependable, especially in relation to financial decisions and money management.

If you’re considering a candidate for a role with access to sensitive financial information, assets, or funds, it’s important to minimize risk. Certain types of employers regularly review the credit histories of job applicants, including banks, government organizations, financial institutions, and brokerage houses. Many employers also evaluate credit history when screening candidates for accounting or money management positions, as these roles have increased potential for fraud.

ShareAble Hires provides both comprehensive credit history and public record information, along with other objective data that individuals don't typically provide in job applications.

How Long Do Credit Checks Take?

As a small business owner, you don’t want to waste valuable time waiting for screening results to return. You need quick, reliable, and cost-effective results so you can make hiring decisions fast.

ShareAble Hires offers credit reports fully formatted for pre-employment screening. To get started simply create a free account and enter your applicant’s email address into the system.  They’ll be prompted to input their social security number and answer a set of identity verification questions, then the reports are delivered to you. 

Conclusion

Gathering all available information about a potential hire is a key facet of building the right team for your company. In certain positions, especially those related to managing finances, it’s important for employers to check applicant credit as part of a complete pre-employment screening. ShareAble Hires gives small business owners access to job applicant’s credit reports and criminal history in minutes. The objective data you need is described in detail and presented in an easy-to-read format, helping you make quicker, consistent hiring decisions that protect your business, your employees, and your customers.

Senior Marketing Analyst, TransUnion ShareAble

Andrea Collatz

She focuses on topics that empower small business owners through data, insights and industry best practices.

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