Why Completing Credit Checks on New Applicants is a Good Option for Businesses and Hiring Managers

May 15, 2021

Hiring a new employee to a company is a very important decision that comes with some commitment and responsibility. When you are looking to hire someone new, there are a variety of important responsibilities and tasks that should be followed. One important task that should be done is to complete a full background check. In certain industries, such as finance or banking, part of this process should include an employee credit check, which will check the credit history and report for any new applicant or hire.

Picture of Financial Responsibility

One of the reasons that you should have credit checks completed when hiring a new candidate is that they can give you a picture of the applicant’s financial responsibility. A full credit check will show you accounts that they have opened in the past, whether they are current on payments, if they have had charged-off accounts of bankruptcies in the past and whether they are in debt or not. This can give you a sense of how well they manage their personal finances, which could be a glimpse of their overall responsibility.

Reduced Risk of Financial Crimes

Another reason that you should have credit checks completed when bringing in new team members is that it can reduce the risk of being victimized by certain financial crimes. Theft, embezzlement, and other financial crimes should always be taken very seriously. When someone is in financial challenges, they may be more likely to steal or commit other financial crimes to help their personal financial situation. When you check the credit of your applicants, it can give a glimpse into whether this is a risk you will be taking on.

Comply with Industry Standards and Regulations

While having a credit check completed on a new applicant is a good idea in any industry or environment, it could also be a requirement. Depending on the industry that you work in, there could be regulations set forth that will require you to have credit checks done. It is common for credit checks to be requirements for various new hires in banking and financial services where they may have direct contact with money.

Balanced Hiring Process

Whenever you are going to hire someone new to your team, you will want a hiring process to be fair and balanced. A great way that this can be done is by creating hiring standards and following them closely. Part of this should include having the same background and other balanced checks done on all applicants. When you have an employee credit check done, it will be another form of fair and balanced diligence that you can use to make a final hiring decision.

Be Open-Minded with Results

While completing a credit check on any new applicant is a good idea, you should always take the results with some caution. Identity theft and fraud continue to be rampant today and anyone can be a victim. There are also a lot of situations when the applicant is not even aware of it. Further, someone could have had financial stress in the past and have moved past it, but negative information is still on the report. Before making a final hiring decision, it would be wise to discuss the credit report with the applicant to understand what is going on. This can ensure you are making a fair decision and not passing up on an otherwise qualified applicant simply due to reporting errors of fraud victimization. You should give the applicant at least a few days to formally respond to the findings.

A proper screening and diligence process is very important when you want to hire new team members. One part of this process that should be considered would be to have a credit check and screening completed. There are a few reasons why an employment credit check is a good idea when you are looking to hire a new applicant.