Priority Personnel Blog

Are Credit Checks a Legitimate Screening Tool?

June 14th, 2011

The use of credit checks has grown over the last several years.  According to a 2010 survey by the Society for Human Resource Management, 60 percent of employers used credit reports for some or all of their background checks.

Employers use credit reports as a screening tool for a number of reasons:

  • They believe it allows them to predict future behavior based on a candidate’s financial history.
  • They are trying to prevent employee theft and assess the applicant’s trustworthiness.
  • They want to reduce legal liability and negligent hiring.

But checking a job applicant’s credit is not without its potential drawbacks:

  • An applicant who has been unemployed for a long period of time may have no choice but to incur inordinate amounts of debt and fall behind in paying bills.  If the candidate has been out of work for months, that doesn’t necessarily mean he should be disqualified for employment.
  • Credit reports fail to provide context.  For example, if debt problems are the result of expensive medical procedures, a low credit score may not indicate anything about future job performance.
  • Credit reports are not perfect.  Ambiguous, dated, inaccurate and/or redundant data create the potential for credit score errors.  While these errors are generally minor, employers should be aware that they exist.
  • Credit reports may not be relevant for the job in question.  Unless the person you’re hiring will have access to sensitive financial information, make financial decisions or handle money, a candidate’s credit report may be of little significance.

Given the potential benefits, as well as the potential drawbacks, are credit checks a legitimate screening tool?  It depends on whom you ask.

According to Christine Walters, a representative for the SHRM during last October’s EEOC public hearing on the practice, effectiveness and impact of credit checks as a screening tool, “SHRM believes there is a compelling public interest in enabling our nation’s employers – whether that employer is in the government or the private sector – to assess the skills, abilities and work habits of potential hires.”

She and other hearing panelists pointed out that the Fair Credit Reporting Act (FCRA) of 1970 restricts employer use of credit reports to employment purposes.  Under the law, the employer must give a job candidate the right to defend himself against (including refuting, explaining or correcting) any collected credit information that might weigh against him.

Chi Chi Wu, staff attorney with the National Consumer Law Center in Boston, expressed a different opinion.  Given the state of the economy, she said that using credit history as a screening tool is “a practice that we believe is harmful and unfair to American workers.  The use of credit history for job applicants is especially absurd when you are looking at an unemployment rate of 10 percent and have many workers looking for a job.”

As an employer, you are within your rights to check a job candidate’s credit.  Before you do so, you should consider:

  • how relevant the information you’re collecting is to the available position;
  • the cost involved versus the benefit to be gained;
  • whether or not your internal staff is trained in how to interpret the complex information contained in today’s credit reports;
  • whether or not there may be potential adverse effects to checking an applicant’s credit.

Ensure Successful Placements with Priority Personnel

Finding the perfect candidates for your organization requires experience, in-depth knowledge of your business and a comprehensive screening process.  Priority Personnel combines all of these to ensure the success of your next hire.  Partner with Priority Personnel today and connect with Central Texas’ top light industrial, office/clerical, technical, professional and retail talent.

Hiring Still Slow? Now is the Time to Review Your Employment Screening Process

March 15th, 2011

The BLS Employment Situation Summary continues to paint an anemic economic picture.

Economists continue to talk about a “jobless recovery,” with many employers focusing on productivity gains, as opposed to hiring, to manage any increases in business.

What’s the upside?

Well, if your company isn’t focused on hiring right now, it may be the perfect time for you to review and improve your employment screening process.  Doing so could help you:

  • increase compliance;
  • reduce theft, fraud and accidents;
  • prepare you to make even better hires when the time comes.

As experts in employment screening, Priority Personnel recommends taking the following steps to reduce the potential for negligent hiring and discrimination:

Consult with your attorney. If you hire on your own, you should have your legal counsel review your screening process to ensure you’re complying with all current legislation and hiring regulations.

Be consistent. Your screening process should be the same for all candidates within comparable job descriptions.  If you do a background check on one manager, you should also conduct the same background check with candidates for all similar positions.  In addition to preventing anyone from “slipping through the cracks,” a uniform process helps minimize your exposure to litigation.

Use social media carefully. Social media has made access to candidate information fast, easy and free.  But if you intend to use this publicly available information to screen candidates, make sure that you obtain written permission and follow all EEOC and FCRA provisions.

Formalize and document your process. If you don’t already have one in place, now is the time to standardize, formalize and document your background screening policies and procedures.  Creating a formal policy makes screening more effective, efficient and consistent.  Furthermore, should a problem arise, your ability to show that you applied fair, consistent and documented screening processes will limit your legal exposure.

Reduce your risks and make better quality hires with Priority Personnel.

Hiring top talent – honest, hardworking individuals who do what they claim they can do – is critical to your organization’s continued success.  Priority Personnel’s Direct Hire Services can help ensure that success.  Here are just a few of the benefits our comprehensive, accurate screening process provides:

  • transfer employment screening risks such as discrimination and negligent hiring;
  • create a safer work environment;
  • build a more productive workforce;
  • save time and eliminate process bottlenecks employment screening creates;
  • hire the best talent available – pre-screened, reference-checked, skills-verified and ready to perform for you.

Work with Priority Personnel and your hiring decisions can be made with confidence – guaranteed.