When in fact, the accounts were overdue. He used the money to pay personal credit card debts. He did such a fantastic job that it lasted for a while before the company caught up to his crime. The risk of fraud and other criminal activities is one reason companies carry out credit checks. This article educates employees and employers on why credit checks are vital.
A credit check is a series of checks that an employer or organization carries out on a potential employee. They are mostly financial information that helps them understand the financial standing of the individual.
Since the General Data Protection Regulation (GDPR) came into existence, credit checks have become a common practice amongst employers. The idea is to ensure that employees don’t misuse their positions.
In general, employers will only check public information that comes in the credit report. These pieces of information are not the same as the kind of information a lender can access. Ultimately, the privacy of the potential employee remains private.
While the reasons for a credit check may vary from organization to organization, all employers want to know is if your financial position will not affect your performance. Again, they want to be sure that you are not a threat to money-sensitive data. To put it straight, the employer wants to know how you will respond to financial pressure.
A credit check can flag down potential challenges that employers won’t accept, like:
First of all, employment credit checks are legal. They are supported by federal law in all kinds of credit checks. The employer is expected to follow a strict process that complies with the standards of the Fair Credit Reporting Act (FCRA).
The FCRA allows employers to request a credit report or history. But, they must:
The Society for Human Resources Management (SHRM) reports that 47% of employers conduct credit checks. After the recession in 2008, several states prohibited employers from using an applicant’s credit history as a criterion for employment decisions. According to them, it’s not fair nor sensible to make people pay for past credit mistakes especially, if it affects their future earning abilities.
Some cities have laws prohibiting credit checks and restricting how information from the reports is used. Eleven states kick against using credit reports for employment screening. This includes California, Connecticut, Oregon, Delaware, Colorado, Illinois, Vermont, Hawaii, Maryland, Washington, and Nevada. However, as stated, these limits are not universal. For example, some credit check laws exempt employees from handling money, goods, and financial data access.
An employer that hires the services of a worker without a credit check is at the risk of:
The best and most reasonable approach is to have policies supporting the procedure. When there is a business reason to do a credit check, it cannot be considered discriminatory. Conversely, use collateral materials like applications, consent forms, interview guidelines, and questionnaires.
Information remains one of the best ways to make hiring decisions without regrets or risk. Credit checks help uncover an applicant’s criminal history and help you see the candidate’s management skills.
By doing credit checks, you’re improving the quality of hires, making the workplace safer, and protecting your customers from harm. Applicants should avoid using all available credit. Rather, work on developing better money management habits to give your credit history a boost.
About the Author: Oyegoke Motolani Oluwakemi is a freelance writer for PrepaidCards123. Standing by the values of originality, creativity, and reliability, she creates content for several niches with the aid of extensive research and observations. She’s an author and runs a blog of her own.