Credit Checking Employees?

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credit determining employmentWith all of the uproar in the media recently about employers asking for Facebook passwords, it has brought other frequently asked questions regarding employment practices to the forefront of the news.  One of the most prominent of these has been whether or not to credit check your employees or potential candidates, and the answer is complicated and may not be as cut and dry as it seems.

While some positions may find credit checking necessary, such as finance officers, there are other positions that most likely should not make it a requirement, like a regular office worker or administrative position.  Employers make many excuses for credit checking, including how personal finance management can indicate levels of responsibility. There are connections that can be made between positive work behavior and credit score, but as always there are so many variants that can apply here and the results of those studies are sometimes heavily biased and performed by background checking companies. Major studies such as in the Journal of Applied Psychology have indeed found that “credit scores did not, however, predict workplace deviance.”

So it seems that a credit score is not an accurate or reliable means of determining behavior patterns.  In fact, making a credit check a prerequisite to employment can mean that employers are losing out on otherwise fabulous employees who could have the potential to truly be an asset to their organization.

Just because an employee has a less than desirable credit score does not mean that they would be poor performer or that they are irresponsible.  For non-financial roles, it is easy to argue that this data should be none of an employer’s business, since this can be effected by entirely personal matters, such as if a candidate has fallen on hard times, is going through a divorce, was a victim of identify theft, or any other number of personal, private reasons for a less than average credit score.

Many candidates may see credit check requirements as a serious invasion of privacy, akin to that of the Facebook password scandal. As previously stated, working in a higher level government or private position where you’re required to manage a large budget should always require a background check and supplement with a credit check contingent upon the results of the former. If your organization does require credit checks, then conduct them, but you should carefully examine how this data is used for hiring decisions. Examine not just how credit checks are performed in the hiring process, but how the resultant data is examined and analyzed. What objective metrics are you using for evaluation?

Highly talented candidates may steer clear of any organization that would make a credit check a condition of employment if they have concerns about their personal credit score. Additionally, the truth of the matter is that regardless of how much research and background checking you do, no hire is guaranteed to 100% work out in your favor.  Recruitment means always taking a risk, albeit an educated risk, and while mitigating the risk to your business is important, it should by no stretch of the imagination come at the cost of invading the personal lives of your employees or potential employees.

By Marie Larsen