Credit Checks For Your Employees and Candidates

It’s fair to say that everyone knows about (and typically expects) background checks when applying for a new position.

But what about credit checks?

For certain positions, an employer may benefit from doing a credit check on candidates during the hiring process. But is this legal? And when should you do it?

Here are things that you need to know about performing credit checks on prospective employees.

State Limitations

The laws governing employee credit checks vary by state. Presently, there are 11 states which have legal restrictions on credit checks for prospective employees. Some of these laws limit which employers can conduct credit checks, as well as for which positions. For example, they may only allow credit checks when hiring for a manager’s position, or for a position that involves handling cash. Other states have banned employee credit checks entirely. Some of the states which include bans or restrictions are Colorado, Hawaii, Nevada and Washington. Depending on the state in which you’re hiring, it’s important to check on laws that are on the books before conducting a credit check.

Other Restrictions

If you do run a credit check, there are several legal restrictions in place. First, you must get written authorization from the employee or candidate before running the credit check. Also, if any findings from the credit check resulted in an adverse decision (such as the decision not to hire), you must inform the candidate of that. You are required to provide the candidate with the contact information of the consumer reporting agency which generated the report for you, and the candidate is entitled to a copy of the credit check if they request it in writing.

Reasons To Do an Employee Credit Check

There are some situations and positions for which it can be beneficial to do an employee credit check.

For example, if you are hiring for a position in a credit union, bank, or other financial institution, this may warrant a credit check on prospective hires.

If you are able to prove that the credit history of applicants has a direct bearing on their future job performance, this is another situation in which a credit check is a good idea.

And of course, if the position requires a certain level of fiduciary responsibility, or the handling of confidential financial information, such as collecting debts or issuing payment, a credit check can be a helpful tool to verify that a candidate is competent to do this.

What Does an Employee Credit Check Include?

A credit report will provide information about every place where the candidate applied for credit, as when seeking a credit card or a car loan. It will also typically include information on outstanding debts or debts that have been paid off or gone to collections. Missed or late payments on credit cards or loans will show up, too.

For certain positions, a credit check can provide an essential piece of the overall picture of a candidate. If you’re not sure how to go about it, contact Veriswift. We have experience in conducting credit checks, as well as other kinds of searches on prospective employees.