Background Checks: What an Applicant’s Credit Report Can Tell You

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We’ve talked about background checks before here at Employer Solutions Plus, specifically “The Importance of Background Checks When Hiring at Law Firms” and “The Importance of Background Checks Within the Healthcare Industry.”

A professional background check will uncover a lot about your applicant. There are certain areas that will stick out like sore thumbs: past employers that are disappointed in this applicant, past encounters with the law … but there’s one thing that employers are often unsure of what to do with: the applicant’s credit score.

Here’s what a credit score can tell you:

  • How responsible and organized an applicant is
  • How financially responsible they are
  • High credit utilization or worse, 100% credit utilization, can reveal that this person is in over their head and unable to stick to a budget.
  • Significant card activity or extensive debt can imply that the applicant is seeking a job for a specific reason – do they really wish to work at your company? Or do they simply want to pay off their existing debt and expensive lifestyle?
  • Recent late fees are important to look at when you’re considering an existing employee for a promotion or different position within your company – late fees imply that something in their life has recently changed and this also results in stress inside and outside of work.

As you can see, a credit score can often reflect the type of person you have in front of you or the situation that person is in. However, if you’re going to run credit reports you must follow the federal laws outlined within the Fair Credit Reporting Act (FCRA), which includes giving the applicant a fair warning of what you intend to look at (along with a copy of the report), and give the applicant an official adverse action notice if you decide not to hire them because of their credit report.

If you work with a PEO, we urge you to utilize their knowledge, tools, and expertise when it comes to background checks, so that your business stays within compliance. If you don’t currently work with a PEO, contact the team at Employer Solutions Plus for a trusted referral.