Credit Reports in the hiring process
Diana S
2 Posts
I'm working for a bank that is running a full credit report on an applicant before they hire. They are getting the applicant's permission. If someone's credit report is bad they won't hire them. This sounds like discrimination to me. Can you not hire someone because their private finances are messed up? The COO says all banks do this but it doesn't smell right to me. Any banks out there have some information for me?
Comments
Have a great day....
job loss, poor health, divorce or whatever: will the bank reconsider the decision? has the bank ever done so?
Chari
I work for a small credit union and we pull credit reports along very similar lines to what Dutch2 describes.
I would like to emphasize that the combination of access to cash, negotiable instruments, and computer systems that could help an individual cover discrepancies in his/her work, creates a high level of risk for theft and fraud. Generally speaking, a financial institution's greatest risk of theft and fraud is internal. So, credit problems come into play when you consider hiring an individual already facing pressure to come up with money. As the pressure increases, so does the likelihood for internal loss to the financial institution. Using a credit report as part of the evaluation process is just one way to work toward controlling that risk.
There are other issues to consider such as bankruptcy and the Fair Credit Reporting Act (FCRA). FCRA, for example, requires certain disclosures throughout the process. In this regard a little research, and some time spent with your attorney, to be sure your use and disclosures (before, during and after your evaluation of the applicant) are in line, will go a long, long, way toward avoiding problems with this practice.
One final note, you should be sure you are pulling an "HR" credit report instead of a regular consumer report so that the individuals number of inquiries when applying for credit are not adversely affected by your inquiry for hiring.
Now that I've been typing for awhile I realize this might be a little too much emphasis but this just has to be a careful and well-handled process to be effective as a hiring tool. I always try to err on the side of too much information when it comes to something like this. x:-8
Jessica
Rough guidelines, subject to revision, for use:
1)Don't consider medical bills
2)Don't consider bankruptcies
3)Consider whether the information really has relevance to employment. An enormous amount of debt can lead to temptation. A history of bouncing checks is not good in a teller. But if someone had a dispute over the cable TV bill five years ago, who cares?
Maybe not, but it often reflects undesirable traits that will impact their job performance. The two main personality characteristics reflected on credit reports are punctuality/procrastination and ability to prioritize responsibilities. Bad credit is often a sign that an individual is unable to prioritize and/or has a procrastination issue.
The bottom line, as I tell candidates before I run the credit report:
If you can't handle your own money, chance are I don't want you handling ours.
Sometimes, I see this as unfair, especially if credit problems are due to medical bills and have talked to our bond company about certain exceptions, but as a whole we follow this practice..