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