Debunking Myths About the Use of Credit Reports in Employment Screening

Most candidates expect that potential employers will perform certain types of screening before extending a job offer. Background checks and drug screens, for example, are commonly requested by employers. What job seekers might not expect, however, is that the employer may request to perform a credit check as part of their screening process. Although some states have passed legislation that forbids or limits the use of credit checks as part of the employment screening process, many other states continue to use them regularly. Below we will discuss some myths about the use of credit reports in employment screening:

All applicants will have their credit checked. According to a 2010 report by the Society for Human Resources Management (SHRM), six out of 10 companies pull credit reports sometimes. However, of those companies that do use credit reports as part of their screening process, only 13 percent report doing so for every job applicant. Most companies reserve checking credit reports for certain types of positions, such as jobs in finance.

Employers check your credit score. Unlike lenders, employers do not check your credit score. Instead, employers consider your long-term credit history; most take into account the last four to seven years.

Companies are only checking to make sure there are no bankruptcies or your credit report. Certainly, bankruptcies and foreclosures can raise a red flag for employers, but there are other items that employers look out for as well. These include: liens, collections, recent late fees, and a high rate of recent account activity, such as the opening and closing of multiple accounts.

Poor credit will immediately disqualify you from a job. Most companies aren’t expecting a perfect credit report. Many are willing to overlook a credit blemish in the past if there has been an improvement in your recent credit history. Additionally, many employers give candidates the opportunity to explain the causes of past credit concerns.

Employers check credit to discriminate against candidates. When asked why they check applicants’ credit reports, the majority of employers will give the same answer: protection. Primarily, they are attempting to protect their company from theft and embezzlement. Additionally, they use credit reports to help reduce their own liability in potential negligent hiring lawsuits.

For more information about the use of credit reports in the employment screening process, please contact us.