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What Should You Be Looking for during a Credit Report Screening?

If your organization is running an employee background check in Buffalo, NY, the screening may include a credit report. How can you use this financial information to make better hiring decisions?

Credit reports include personal information (name, address, Social Security number), a list of credit accounts (credit cards, mortgages, loans), payment history, outstanding balances and public records (property purchases, bankruptcies, civil judgments). However, the credit report used for background screening is a modified version; therefore, it does not include a person’s credit score.

Most screening providers offer credit reports as part of their services, but according to a 2019 survey, only 6% of hiring managers check the credit of all applicants. Credit checks are most common for financial and executive level positions as well as jobs in which employees routinely deal with other people’s accounts and personal information. Nevertheless, some organizations run credit screenings to exercise due diligence and to prevent employee theft.

What Are Red Flags in a Credit Report?

Identification Discrepancies
A credit report is one way to make sure a person is who they say they are. If the information listed in the report doesn’t match the information the candidate provided, you should ask questions.

Lots of Late Payments
A candidate with an ongoing list of late and missed payments may struggle with organization and responsibility. If the job placement requires managing company money and/or handling sensitive consumer information, you may wish to reconsider.

Long-term Mishandling of Finances
Many successful people have had financial problems at some point in their lives, so be careful not to disqualify someone simply because their credit report isn’t perfect. View the bigger picture. Habitual mishandling of credit is different than learning from one’s mistakes. For example, if someone worked diligently to pay off excessive debt, they could be a fantastic hire.

Signs of Financial Distress
Sometimes credit problems are too big for people to handle. Take note if a candidate’s monthly payments exceed their monthly salary. This tricky situation could lead to risky and unethical decisions.

What If You Decide Not to Hire Someone Because of Their Credit Report?

According to the Fair Credit Reporting Act (FCRA), when a background check prevents someone from landing a job, you must inform the applicant. This gives candidates an opportunity to contest incorrect information. (And, sometimes reports do contain mistakes.) According to the FCRA’s pre-adverse and adverse action process, an organization needs follow pre-adverse action procedures to let the candidate know their background screening was a problem. After a reasonable amount of time, the company may follow up with an adverse action notification.

Do You Want to Learn More About Using Credit Reports Effectively?

As Western New York’s leading pre-employment background check service, Metrodata Services can help your company hire a more dependable workforce. We work directly with our clients to design customized screening packages to best fit their needs. Learn more about our credit report services today!

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