Why do employers check credit?

  •  08/27/2018
  • By Andrea Collatz
  •  Credit history , Employer

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 do employers check credit? 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.

There are many reasons hiring managers perform an employment credit check, including risk reduction, and to assess financial responsibility.

Why do employers do credit checks?

1. Reduce Risk

Especially when it comes to financial or managerial roles, it can be important for employers to run credit checks. Those who rank high in organizations are usually involved with decisions concerning money matters, and a poor credit report could be relevant to the hiring decision.

Whether you’re screening a new candidate or considering a current employee for promotion, ensuring their credit reflects positive financial capabilities is critical. Otherwise, business owners risk hiring a candidate with negative consequences for the company.

job candidate credit history review

2. Lack of Responsibility

All in all, employers do credit checks to help ensure their candidate demonstrates a sense of financial responsibility. Of course, there should always be communication and a chance for your applicant to explain negative credit information.

In some cases, it may be as simple as someone falling short on repaying their student loan debt because times were financially unstable. Always do your due diligence to understand your pre-employment credit report and be sure to consider other factors regarding your applicants’ backgrounds as well.

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 CHECKS 

In recent years, and a survey by Harris Poll on behalf of CareerBuilder states that now 72% of employers perform background checks in order to better protect their business.

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 answer more specifically why employers do credit checks, the benefits they gain, and how they do it.

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

WHY DO JOBS RUN CREDIT CHECKS FOR 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.

FREQUENTLY ASKED QUESTIONS: WHY EMPLOYERS RUN 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. We also offer services to check criminal history records.

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. In certain states and cities, regulations regarding the use of credit reports can impact the way employers utilize this information.  In addition, some cities 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.

Our consumer reports meet Fair Credit Reporting Act (FCRA) regulations and comply with the latest laws and regulations governing consumer reporting agencies.

Employer credit accounts are delivered straight from TransUnion, a trusted credit reporting agency that handles 230 million credit files domestically.  

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. When you go through traditional background check companies, you could wait days or weeks to get the answers you need.

ShareAble Hires offers credit reports fully formatted for pre-employment screening with much quicker results. 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—sometimes within a matter of minutes.

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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