It has become fairly routine for employers throughout the US to run an employee credit check on a prospective new hire, and it’s almost an expected part of the process.
If you’re doing these checks without good reason or without complying with federal law, however, or you’re handling the process or the information incorrectly, you could find they cause more problems than they solve.
Make Sure There’s a Good Reason
Like any personal information about a prospective hire, you need to be sure your request for a credit check is reasonable. If your new hire will never be handling money or in a position of trust in their role, then you might not have a good reason to run a check.
If you can’t justify the check, don’t do it.
Follow the Regulations
First, you should know that it’s not legal to request consumer credit reports from potential employees in every state. Before you even consider the other legalities, make sure you are within your rights in yours.
Once you know that, obtain their consent is in writing so that it’s clear and conspicuous. In other words, get them to sign consent on a separate piece of paper, which states the request and the use of the information in clear, easy-to-understand language.
Use the Information Correctly
Finally, when you have the employee credit check information from the consumer credit report it’s essential that you handle it correctly. For example:
- Provide the employee or candidate with a copy and an opportunity to dispute it before you take any negative action.
- Remember that you cannot take any information related to bankruptcy that is older than ten years.
- Likewise, tax liens, accounts that are under collection and civil judgments cannot be considered if they are older than seven years.
- Arrest records and other negative information are also off the table after seven years.
- In fact, if it’s anything other than a conviction, chances are you can’t consider it if it’s older than seven years.
One of the big problems related to running an employee credit check on staff is that once you have seen information there’s no way to completely forget it, and even if it’s successfully challenged, or related to an old issue, it can be tough not to let those issues affect your hiring decisions.
If you are in any doubt about whether you can be objective, it may be a good idea to hire a third party to conduct your checks, and only provide information that is verified and relevant. That way, you won’t muddy the waters with information that could cause awkwardness.
Also remember that even when there is negative information, it doesn’t necessarily mean you need to write off a favorite candidate. Consider asking the candidate directly about any issues that arise, and give them the opportunity to explain. You may find that they’re still the best person for the job, and with a little tweaking, they might still be a good fit for the role you had in mind.