Are Credit Checks On the Way Out of the Hiring Process?

According to a recent SHRM survey, Poor Credit History Not Barrier to Hiring, the frequency and manner of credit background usage in the hiring process has changed, even in just the past couple of years.

Some of the highlights of the study include:

  • The overall percentage using credit checks for employment screening has dropped—60% used them in 2010, versus the 47% that did in 2012
  • 80% have hired a candidate, despite a bad report
  • Most credit checks were interested in a credit history of 2-7 years
  • Nearly 2/3 if organizations reported they allowed candidates to explain the results before making a decision
  • The most common reason for considering credit background was to reduce theft or embezzlement, just as with criminal background checks

Why The Credit Check Change?

According to Mark Schmit, SHRM’s vice president of research, the drop in report requests is due largely to employers becoming more aware of state and federal government scrutiny, so they are using them more discreetly and to target more specific jobs.

One background screening company reported that less than a third of its 2,256 respondents reported conducting credit checks for prospective employees citing concerns over new legislative and increasing EEOC scrutiny.

Most Credit Checks Are Done Later in the Hiring Process

According to the SHRM survey, companies that did rely on credit checks use them later in the hiring process, either after a contingent job offer (58%) or after the job interview (33%.)  Of those that initiated them on select job candidates:

  • 87% were for positions with financial responsibilities
  • 42% were for senior executive positions
  • 34% were for positions with access to highly confidential employee information

A Few Good Pointers

The report offers a few useful guidelines applicable to the use of both credit and criminal checks:

  • Look at your organization’s policy in light of EEOC guidance, and evaluate where there may be a disconnect between the two.
  • Be cautious about the use of blanket policies.
  • Make sure the team that is involved in hiring and background screening is properly trained around EEOC guidance and the Fair Credit Reporting Act (FCRA).
  • Take into consideration the details of an individual’s report, such as the circumstances surrounding the negative credit item.

Here is the full SHRM report:

About Michael Gaul

A security industry professional since 1988, Michael has extensive expertise in the fields of human capital risk management, physical security, and background screening process management. Michael leads Proforma’s sales, marketing, and strategic customer relations efforts.


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