Get The Facts About Employee Credit Checks
When a potential employer reviews your credit history to discover how you’ve handled consumer debt, this is known as an employee credit check.
Definition Of Employment Credit Check
Credit checks are sometimes conducted on applicants along with job history, criminal background checks, and profile checks and those results are used to make hiring decisions. When applying for jobs that involve money, employers often run credit checks. In banking, accounting, and investment, for instance, credit checks are frequently required.
According to a survey conducted by the National Association of Professional Background Screeners (NAPBS), 31% of employers ran credit checks on some applicants, while 16% checked the credit of all applicants.
Working Process Of Employee Credit Checks
Once you’ve been offered a job (or perhaps a promotion), your employer will request a credit check from a third-party company. A credit report includes all your name, address, previous names, and addresses, as well as your Social Security number. Furthermore, it includes your debt history, including your credit card debt, mortgage, auto, and student loan debt, including late payments. In an employee credit report, certain details are not included, including your date of birth. Because this information could be used to discriminate against candidates based on their age, it is not included. It also excludes your credit rating.
Important Points to Remember:
1. Potential employers run a credit check on you to see how you’ve handled debt.
2. The credit check includes information such as your name and address, as well as your credit history.
3. Employer credit checks and background checks may be subject to tougher rules in some states and cities.
4. Make sure your credit reports are accurate before applying for jobs.
Employment Credit Check Laws In The United States
The Fair Credit Reporting Act (FCRA) is a federal law that regulates job screening reports, including credit checks.
Here are some things employers must do (or not do) when performing a credit check on a potential or current employee, according to the FCRA:
1. Your written approval is required by the employer: An employer must notify you in writing and obtain your written authorization before conducting a credit check on you.
2. Old data cannot be included in the report: In most cases, a credit report cannot contain unfavorable information that is seven years old or older.It also excludes bankruptcies that are older than ten years.
3. There are laws governing the disclosure of bankruptcy information: You cannot be discriminated against just because you filed for bankruptcy, according to the FCRA. However, because bankruptcies are public records, employers can easily get this information.
Credit Check Requirements For Employees
The specific credit check requirements for employees can vary depending on various factors, including the nature of the job, industry, and local laws and regulations. While I can provide some general information, it’s important to note that you should consult with legal professionals or human resources experts to ensure compliance with applicable laws in your jurisdiction. Here are a few points to consider:
1. Legitimate business purpose: It’s generally recommended to conduct credit checks for positions where an individual’s financial responsibility or access to sensitive financial information is involved. This can include roles in finance, accounting, banking, or positions that handle cash or company assets.
2. Written consent: In most cases, you will need to obtain written consent from the employee before conducting a credit check. This consent should be obtained through a separate document and should clearly explain the purpose and scope of the credit check.
3. Compliance with anti-discrimination laws: It’s crucial to comply with applicable anti-discrimination laws, such as the Fair Credit Reporting Act (FCRA) in the United States. These laws prohibit discriminatory practices based on an individual’s credit history and require employers to follow specific procedures when obtaining and using credit information.
4. Consideration of local regulations: Some countries or regions may have additional requirements or restrictions on conducting credit checks. For example, in certain European Union countries, credit checks may be subject to strict data protection regulations.
5. Confidentiality and data security: Employers should handle all credit information obtained from employees with utmost confidentiality and ensure compliance with relevant data protection laws.
6. Periodic reviews: It’s important to review credit checks periodically rather than relying solely on initial checks. This ensures that the information remains relevant and appropriate for the employee’s role.
Remember, laws and regulations can change over time and vary across jurisdictions, so it’s essential to consult legal professionals or HR experts to ensure compliance with the specific requirements applicable to your location and industry.
Put It All Together
Using an employee criminal background screening check, you can identify candidates who may have credit histories that could affect their ability to perform the job for which they are being considered. Determine if a candidate has a history of meeting financial obligations in order to make an informed decision.
