A credit report can be an important part of a background check for potential employees. Find out the requirements your business must follow when obtaining credit reports for applicants.
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by Brette Sember, J.D.
Brette is a former attorney and has been a writer and editor for more than 25 years. She is the author of more than 4...
Updated on: January 9, 2024 · 4 min read
Before you hire an employee for your business, it's a good idea to do a background check. As part of this process, you may also opt to perform a credit check. But before doing so, be sure you are clear on the legal and professional requirements and potential ramifications.
When you're hiring an employee, you want to be sure you're bringing someone on board you can trust. A credit check can give you important information about potential employees that could help with your hiring decision.
A credit check for employment does not provide the applicant's full credit history, such as their credit score or even date of birth. Requesting the report does not register as an inquiry in the same way applying for a loan does, so the check itself won't impact the applicant's credit.
When you run a credit check, you receive information about the applicant's timeliness of payments and amount and types of debt. A report showing a lot of late payments may possibly indicate the individual is not very organized or dependable. A person with a lot of debt might be experiencing financial trouble, which some employers view as a sign of potential to engage in fraud or theft. However, it's important to note that there is growing pressure on employers to understand that many people in financial trouble are can be honest and hard-working employees.
If you decided to conduct a credit check as part of the hiring process, be sure to follow these steps and requirements:
Do not do any of the following when conducting a credit check:
A credit report can be an important addition to a background check on a potential employee, but it is important to fully understand the legal requirements involved with accessing these reports.
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