SHRM Study Reveals Key Findings On The Use Of Credit Reports For Background Checks

Robert Capwell

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Credit Report   What is says about you resized 600According to a recent survey released by the Society of Human Resource Management (SHRM), employers are still focused on three key factors when making a hiring decision: 1) previous work experience, 2) a good fit for the job and organization, and 3) specific skills or expertise needed for the job.  But the question remains-what about the use of credit history information?

Just under half of the respondents (47%) stated that they conducted credit background checks on prospective employees and revealed that the top reasons to conduct credit history checks included:

  • 45% - The need to reduce theft and embezzlement
  • 22% - To reduce legal liability for negligent hiring
  • 19% - To assess the overall trustworthiness of the job candidate
  • 10% - To comply with applicable laws requiring background checks for a particular position such day care, teachers, licensed medical practitioners or to comply with credit card processor standards (PCI) requirements.

Continued Responsible Use by Employers

Employers stating that they conducted background checks on prospective employees revealed that (87%) conducted credit checks on candidates applying for positions with financial responsibilities, (42%) on candidates applying for senior executive positions and (34%) on candidates for positions with access to highly confidential employee information.  Of the employers surveyed, (64%) allowed the candidate to further explain their credit history results before a hire/non-hire decision was made and (80%) of the employers reported that they have hired a job candidate whose credit report contained information that reflected negatively on the candidate’s financial situation, suggesting that negative credit information is not often a barrier to employment.  The study also revealed that employers are using a candidate’s credit history as part of the screening process later in the decision-making process as (58%) of the respondents admitted to using credit history information after a contingent job offer was issued.

Based on survey results of when and how credit report information is being used, employers seem to be taking a more practical and targeted use of such information within the decision-making process.  They are allowing candidates to further explain negative information contained within their credit report along with relying on key factors that drive the decision-making process such as experience and proper fit.  State law compliance has also come into play for responsible credit report use for employment purposes.  California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington either prohibit or restrict employers from using such information at a certain time within the hiring process or restrict the use of credit reports based on position or industry.  Employers should refer to their corporate legal counsel and active legislation within their state for proper use.

Employer Resources for Consumers

The following are additional resources that provide consumers guidance with Federal law and guidelines around credit reports and their rights.

Federal Trade Commission (FTC)
FTC – Consumer Credit Information 
Yearly Credit Report Review


Employment Credit Reports from EBI
At EBI, we understand the critical role that credit reports play for assessing a candidate or even a current employee. EBI offers access to FCRA compliant employment credit reports in a secure and confidential manner.  EBI can provide a complete picture of your candidate, confirming the candidate’s true identity, address history, and credit worthiness with our “one stop” background screening solutions.  All information contained herein is provided by Employment Background Investigations, Inc. (EBI) solely for the convenience of its readers. EBI is not providing legal advice or counsel and nothing provided within should be deemed as legal guidance or advice.  Readers should consult with their own legal counsel to determine their legal responsibilities or if they have questions on any information provided by EBI.

EBI is committed to providing employers with valuable education and resources on changing legislation and cutting-edge and compliant solutions to meet federal, state, local and international mandatory requirements. If you found this information useful, select the button listed below and access more industry news, resources and tips from EBI, a NAPBS Accredited screening firm and global leader in the background screening industry!

Background Checks, SHRM, EEOC & FCRA

Robert Capwell

Posted By: Robert Capwell

EBI’s Chief Knowledge Officer, Mr. Robert E. Capwell, is considered one of the leading experts in the background screening industry with over 22 years of experience in the field. Mr. Capwell was a contributing author of the second edition of the ASIS Pre-employment Background Screening Guidelines and has written numerous articles and whitepapers for various publications including a periodic column on background screening for The Society for Human Resource Management (SHRM) Online. He has been quoted in The Wall Street Journal, Human Resource Executive Magazine, Entrepreneur Magazine, and several HR-related publications. Mr. Capwell speaks regularly to industry colleagues and HR Professionals both nationally and internationally.

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