Credit Reports and Their Usefulness in Select Hiring Decisions

Many state legislators have already banned the use of credit checks in employment decisions, barring select positions. The reason being is that credit checks provide an insight into an applicant’s life that most employers simply do not need for employment reasons. It creeps over the boundary into an invasion of privacy that quite plainly isn’t warranted for a myriad of different positions. Although it should be noted, there are some exceptions for positions that have fiduciary job responsibilities like accountants, financial advisors and executives.

There are now 10 states that ban the use of credit reports in normal employment decisions, unless warranted by the job duties of the position. These states are CA, CO, CT, HI, IL, MD, NV, OR, VT and WA. In these states the use of credit reports are limited to only applicable situations like fiduciary job positions. In the other 40 states the use of credit reports is open to all employment decisions, but we at HireSafe believe the other 40 states and our clients should look to the other ten for guidance.

There is a lot of sound reasoning in banning credit reports from employment background screening. Credit reports give an insight into an individual’s life that is not pertinent in employment decisions. If an individual has made some mistakes with money in the past and are now facing the repercussions from those choices, how wise is it to use that information to bar them from employment. The only thing that could come from that would be to compound the issue further.

Excluding employment decisions, credit reports present a cross into an invasion of privacy for most applicants. An employer simply doesn’t need to have that information at their fingertips in most situations and it just isn’t relevant to employment. Employment background screening teeters on the edge of the “right to know” and an “invasion of privacy” continuously; it’s just the nature of the industry. The thing that is important is deciding what is necessary and what isn’t.

Where credit reports absolutely are necessary are in positions where the employee would be in constant contact with monetary assets of some sort. These employment opportunities put people in positions where fraud becomes very much available to them and putting a high risk individual with a history of bad fiduciary decisions wouldn’t be wise.

Employment background screening looks at individual’s past to see if there are issues that could conflict with the required job duties. Just like you would never put a sex offender in a position that had constant contact with children, it would be unwise to put an individual with terrible credit and/or in debt in a place where they had contact with money, the risk is too high.

Deciding when it’s appropriate and necessary to use credit reports in your employment background screening program is something that all employers should consider, unless of course it’s already been decided by your state government. The best methodology to figure out whatever is necessary for a background check is to look over the job duties and decide what in applicant’s past would conflict with those duties. 

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