New survey says more employers doing fewer credit checks

A recent Society for Human Resource Management survey found that more than half of respondents to a recent Society for Human Resource Management survey said they don’t use credit checks in the hiring process. That’s an increase from 2010, when 40 percent of organizations reported not using credit background checks. In 2004, 39 percent said they did not use such background checks when hiring.

The survey also found:

  • Most employers focused on credit histories of two to seven years. Only 6 percent of organizations said that all years of credit history were equally important, a decrease from 17 percent in 2010.
  • Of the 34 percent of employers that conducted credit checks on selected job candidates, 87 percent did so for positions with financial responsibilities and 42 percent used them for senior executive positions.
  • More organizations saying that complying with state law requirements was among the primary reasons criminal records checks were done, up from 20 percent in 2010 to 28 percent today.
  • Fifty-eight percent of organizations allowed job candidates to explain the results of their criminal checks before the decision to hire was made.

The findings suggest employers are becoming more selective on the background check processes they use and are tailoring the vetting process to more acutely select the kind of background information most useful for each individual job description. This comes on the heels of the Equal Employment Opportunity Commission’s new guidelines on criminal background checks.

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Clearing up myths about background checks

With the use of background checks increasingly in the news, employees and job seekers across all industries are becoming more wary of what details about their personal and professional histories are being researched, reviewed and used against them during the hiring process.

The vast majority of employers use fair, unbiased measures to help them determine the best applicant for a particular job. But that doesn’t mean there aren’t a slew of misconceptions out there regarding employment screening. Here are a few of the most common misconceptions, which all employers should be aware of as you journey through the hiring process.

Myth 1: Background check policies are the biggest reason the unemployment rate is so high. This is untrue. Background checks do keep the occasional applicant from securing the job, but background check policies are put in place to ensure the best applicants are hired and retained. The goal is to hire, not to keep a position unfilled.

Myth 2: If you have a criminal record, you won’t be hired. While having a criminal record could pose some difficulties during the hiring process, that depends on how long ago the crime was committed, the nature of the conviction, among other things. According to one survey, less than 10 percent of applicants with criminal records are denied employment.

Myth 3: Employers factor in your credit score when deciding whether or not to hire you. Not true in most cases. Credit checks are typically done when the job in question involves handling money and keeping track of finances. Even so, most employers use what’s called an Employment Credit Report, which does not include a credit score.

Myth 4:  Applicants aren’t given a chance to correct or argue findings. Actually, by law employers are required to give job applicants a copy of their background check and allow them to clear up any misinformation.

As with most areas of business, communication is key. Make sure your policies are clearly stated, and strictly followed. And give prospective employees the chance to clear up any misinformation that might have been uncovered during the process.

Failure to perform background check has $1 million price tag for Roman Catholic Archdiocese of New York

It’s difficult to put a dollar figure on the value of background checks. But that got a lot easier recently for the Roman Catholic Archdiocese of New York. The value for them turned out to be $1 million – that’s how much a woman embezzled over a seven-year period while working as a volunteer bookkeeper at the famous St. Patrick’s Cathedral in Manhattan.

The bookkeeper was hired in 2003 before had been convicted of grand larceny in one case and had pleaded guilty to a misdemeanor in another, according to an article in The New York Times.

This story should serve as a reminder to all those who still believe pre-employment screening is not worth the time and money it takes to conduct them. Criminal records and credit checks are a must for anyone who will be entrusted with the finances of your business. In particular all those who handle money, or care for others, should be thoroughly vetted. 


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Is the Use of a Credit Check Always Legal?

More and more employers are choosing to use credit checks on employees as part of their pre-employment screening process. The thought is that looking at a person’s credit report is a pretty good indicator of whether that person is fiscally responsible and, therefore, possesses at least some of the traits that make up a good solid employee.

But it’s important for an employer to tread lightly and be careful in regards to credit checks, as some laws regarding the use of credit checks are different from state to state. For instance, some states, including Oregon and Washington, only allow an employer to use a credit check on an employee if it’s truly applicable to the job, such as an accounting position. If you want to use a credit check on someone applying for a position in, say, sales or marketing, then a credit check would be illegal. And according to the federal Fair Credit Reporting Act, you always have to ask an applicant’s permission to run a credit check.

Credit checks can be a great resource to use when deciding who is right for a particular job. But keep in mind that laws are being changed and fine-tuned regarding their use in the private sector. Some state lawmakers and in Congress are mulling over bills that would limit the usage of credit checks for employers. So keep up on the laws that apply to your business in your state, and make sure the employment screening service you hire is on top of things too.

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Use Employment Screening Reports to Search for Patterns of Behavior

When conducting a background check, it’s easy for an employer to get caught up in every line item of the report. While there’s a wealth of knowledge that can be gathered and reported on a prospective employee, through credit reports, criminal background checks, driving records and more, none of that is ultimately helpful to an employer unless he or she understands how to read an employment screening report.

The key to making wise decisions on prospective employees is to look for patterns of behavior, not necessarily single infractions or one-time issues. For example, if someone has one speeding ticket, it’s not cause for alarm. But if an Pokies applicant has 15 unpaid parking tickets, that should raise a red flag. Even though parking tickets are in no way a serious offense, the sheer number of them point to a pattern of behavior for this person that could signal they are careless, disrespectful of rules, or perhaps just generally disorganized. None of those things are what you’d hope or expect your next manager to be.

So when you get that report, go line by line but more importantly, refocus to the bigger picture, using the clues given in the report to piece together the applicant’s personality, work ethic and responsibility level.

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SHRM Tells EEOC to Reconsider Their Views on Background Checks during Hiring

The U.S. Equal Employment Opportunity Commission (EEOC) has striven to ensure that all workers be given a fair shot at obtaining jobs.  However, the organization’s vigilance has often come at odds with employers’ abilities to use background checks, specifically credit checks, as a measure of weeding out applicants with questionable records.

Consequently, the Society for Human Resource Management (SHRM) has urged the EEOC to reconsider its position in regards to credit checks, citing many types of workers who should ideally have excellent credit records in order to obtain certain positions.  (As an FYI, we’d suggest anyone with access to his or her employer’s financial records or cash be screened via a credit check background check.)

Without a doubt, the EEOC is simply trying to make certain that no potential employees are unfairly eliminated from a job applicant pool.  But SHRM makes a strong argument for the employer’s side of the coin, as performing background checks (including those regarding credit reports) offers protection for workers, companies, vendors, volunteers and customers.

Almost Half of Employers Do Not Background Check for Credit Problems

A recent poll conducted by the Society of Human Resource Management (SHRM) revealed that a whopping 40% of all organizations surveyed do not conduct credit background checks on job candidates.

This statistic is alarming for a number of reasons, most notably:

  • If these employers aren’t background checking for credit problems in potential workers, they are probably “missing the boat” in other areas, too.
  • With unemployment being so high, many applicants have serious credit issues.  This can lead some individuals to make questionable decisions on the job, especially if they have access to money.
  • Employers who do not background check for credit issues could be setting themselves up for serious future issues and liability.

Our recommendation is for all companies to perform comprehensive background checks which include credit checks, just to be sure.

Background Checking is on the Rise

Though it doesn’t surprise us, this article from the Wall Street Journal hits home the fact that more employers than ever are checking the backgrounds of potential employees.

In fact, in the story, it states that, as of 2009, 47 percent of respondents to a SHRM survey said they are conducting credit checks on possible workers.  That figure is up 5 percent from the results of a similar study only a few years ago.

For employees, this is a double-edged sword, of course.  If you haven’t anything nefarious on your record, there’s nothing to fear.  But if you’ve had credit problems, run-ins with the law or other issues that could be red flags to companies, it might be best to disclose them upfront.  Sure, it may cost you the job… but if the employer is doing a background check, you won’t have the job anyway. 

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  • Credit Checks ~ Liked by Employers, Loathed by Applicants?

    In an era where significant amounts of job candidates resort to lying on their resumes and during interviews, background checks have become necessity.  And that means many employers are turning to comprehensive checks which include information into an applicant’s credit history.

    Because so many Americans are having difficulty with their credit, there’s a growing movement by candidates to squelch credit reports.  Essentially, they feel the reports will unfairly pigeonhole them as being fiscally irresponsible.

    Though this is understandable, it still behooves employers to complete credit checks, especially if the job candidate is going to be handling money.  This doesn’t mean that a questionable report will definitely preclude an applicant from getting the job, but it does mean that the employer will know what he or she is getting in terms of a worker.

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  • What Does a Bad Credit Report Mean?

    Employers are increasingly conducting credit checks on potential new hires, but not all of them understand how to interpret the data.  After all, a credit check report doesn’t equate to simply receiving a credit score; in fact, it’s much more comprehensive… and that can make evaluating it complicated.

    So what does it mean if a potential employee’s background check comes back clean but his/her credit check comes back with “black marks” (figuratively speaking, of course)? 

    Here, we’ll look at a quick way to determine how the credit check data potentially affects your decision:

    1.  Typically, if a person is to have any financial responsibility, you want someone with a squeaky-clean credit check report.  If he/she cannot handle his/her own finances, do you want him/her to handle your company’s?

    2.  If you see that a person owes a great deal of money and will be in a position where he/she can have easy access to your business’s cash, you might want to think twice about making a job offer.  Many cases of embezzlement occur because the embezzler is deeply in dept.

    3.  If you notice that the individual consistently makes numerous late payments (or skips payments), it could be a sign that he/she isn’t dependable.  While it’s not necessarily a total deal-breaker (especially if the late payments were five years ago), you do have to ask yourself if he/she will be late with other items, such as projects and assignments.

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