Careful steps when using credit checks to weed out applicants
May 30, 2008 by Jim GiulianoPosted in: Communication, Employment law, Hiring, In this week's e-newsletter, Latest News & Views, Records documentation, policies
Yes, credit checks have been shown to be a reliable resource for screening applicants. Yes, you have to be extremely careful about how you access and use the reports.
In his book, Sleuthing 101, Background Checks and the Law, professional screener Barry Nadell points out that if you’re going to use credit checks as a filter, you should:
- Get the applicant’s OK to run the credit check, and make sure the OK is a separate signed document and not part of the standard application. Many HR departments have been accused of slipping in a credit-check authorization among other application data and info. Making the authorization separate is a great defense against the slipping-in charge.
- Remember to get authorization for Internet applicants. Most states allow companies to use a “click here” option on Web applications to get the applicant’s OK. Just make sure you don’t rely on a Web page saying you’ll do the credit check; that’s not enough. There must be an electronic-OK action by the applicant.
- If you reject an applicant because of an iffy credit report, give the applicant a copy of the report and the reason for the rejection.
For the full text of the Fair Credit Reporting Act and how it applies to job applicants, go to: http://www.ftc.gov/os/statutes/031224fcra.pdf
Tags: barry nadell, credit checks, fair credit reporting act, sleuthing 101
June 2nd, 2008 at 2:06 pm
A manager had asked me today if they could legally tell an applicant that the reason why they weren’t hired was because of their credit. I had looked on line to a few different websites and didn’t come up with a clear answer. We are a mortgage company and the most important thing we look for is fraud & criminal.
Can we legally not hire a person because of their credit?
August 11th, 2008 at 10:23 am
I have been the HR director for a community bank for 20 years, and we do reject applicants due to credit. I discuss the report with the applicant to verify the information, and I send a letter with a copy of the report to the applicant. I have had applicants who can prove that they are victims of identity theft. I am finding a larger number of applicants with experience have had problems with credit, and I need to develop guidelines to follow.
Does anyone have suggestion about reasonable guidelines? For example – “absolutely no unpaid collections” or “with applicable experience, collections under a specific dollar amount will be considered”. At this time, if we would not consider the applicant for a bank loan, I do not hire the person.