Credit checks can be helpful hiring tools for employers. Depending on the depth of the credit check, they can provide insight into a potential employee’s:
- Identity.
- Credit history (including missed or late payments).
- Employment history.
According to a study, 31% of surveyed employers conduct credit checks on at least some of their candidates. The number of companies performing credit checks is slowly increasing, as screening potential hires’ credit can help protect employers from serious legal issues.
3 challenges employers can avoid by running credit checks on candidates
A credit check is a specific way of getting in-depth insight into the responsibility level of a job candidate. Employers can be subject to many liabilities if they don’t screen their candidates before hiring them. As a result, credit checks matter beyond the hiring process. Credit checks can help employers avoid several issues, including:
- Employee turnover — Some credit checks show a candidate’s employment history. If an employee has cycled through several short-lived jobs back to back, it may indicate that they may not be ready to work long-term. A pattern of a lack of commitment can signal employee turnover down the road. Employee turnover can be an expensive inconvenience. According to a study, turnover costs can be as much as 150% of an employee’s annual salary. Credit checks can help employers avoid hefty turnover costs associated with a loss of time and productivity.
- Employee fraud and theft — Screening potential employees’ credit can help alert employers of suspicious or criminal activity. For instance, if a candidate’s resume does not match their employment history, it can indicate that they are hiding something. Also, if numbers in an employee’s credit history don’t add up, and the candidate dodges questions, it can indicate a deeper issue. Employees who have a shady financial past can be more likely to hide things at work. And while it wouldn’t be fair to automatically assume they would steal or embezzle, they might be the first employees who are suspected. To avoid theft and fraud complications altogether, credit checks can help employers hire honest and forthcoming employees.
- Negligent hire lawsuits — Negligent hire claims occur if an employee causes harm, and the employer could have prevented that harm. A negligent hiring suit can cost employers millions. Background checks and credit checks can help employers avoid negligent hire suits. In particular, credit checks can help employers ensure that their candidate is responsible and trustworthy, and that they wouldn’t cause harm in the first place.
Seeking credit check services for your business? The Background Experts team is here to help!
Doing employee background checks can be frustrating and time consuming. Fortunately, our Background Experts team can take this task off your hands. Our team members have 30 years of combined experience in performing employee background screenings, including credit checks, and we’re fully FCRA certified. We also offer a wide range of screening services that can help HR managers and hiring agents ensure that their potential employees are fully vetted and ready to get to work.
Contact our team today for more information about our services or to talk to one of our background screening experts.