Credit Reports in the hiring process

Diana S

I'm working for a bank that is running a full credit report on an applicant before they hire. They are getting the applicant's permission. If someone's credit report is bad they won't hire them. This sounds like discrimination to me. Can you not hire someone because their private finances are messed up? The COO says all banks do this but it doesn't smell right to me. Any banks out there have some information for me?

lizzy

i worked for a bank for several years and we also pulled credit reports as a part of the hiring process. it is common in the banking industry to do this...i don't believe it would be considered any type of discrimination because having bad credit is not a characteristic of a protected class..so i believe you can pick and chose however you please based on the credit reports..i may be wrong but i know most banks around have the same procedure. have a good day!!

Dutch2

I too get to play in a bank all day and we insert an "Authorization and Consent for Consumer Credit Investigation" form into every blank application. Of course we only run the credit report on the few that we are seriously considering for hire. All applicants know on the front side that we will run this report. If their credit re;port comes back bad but the Supervisor feels very strongly that this applicant is the best fit, they can go to the President of the bank to see if they can talk him into letting them extend a job offer to this candidate, but only the President can do this. Having come from a non-banking background, I asked our bank attornies about this, and they stated this was fine as we are a financial institution were many people have access to large sums of cash and to the computer network to transfer funds around electronically, so therefore it is permissible for us to check the credit ratings before hand. Of course some times there are legitimate reasons for poor credit, costly health care, divorce, etc... the applicant is given a copy of the report and has an opportunity to explain if they wish.
Have a great day....

cebudragonlady

Your comment makes me wonder...when a candidate has poor credit and the bank declines to hire ~ THEN what if the candidate explains that it was due to
job loss, poor health, divorce or whatever: will the bank reconsider the decision? has the bank ever done so?

Chari

Jessica

[font size="1" color="#FF0000"]LAST EDITED ON 03-13-03 AT 10:21AM (CST)[/font][p]Diana,

I work for a small credit union and we pull credit reports along very similar lines to what Dutch2 describes.

I would like to emphasize that the combination of access to cash, negotiable instruments, and computer systems that could help an individual cover discrepancies in his/her work, creates a high level of risk for theft and fraud. Generally speaking, a financial institution's greatest risk of theft and fraud is internal. So, credit problems come into play when you consider hiring an individual already facing pressure to come up with money. As the pressure increases, so does the likelihood for internal loss to the financial institution. Using a credit report as part of the evaluation process is just one way to work toward controlling that risk.

There are other issues to consider such as bankruptcy and the Fair Credit Reporting Act (FCRA). FCRA, for example, requires certain disclosures throughout the process. In this regard a little research, and some time spent with your attorney, to be sure your use and disclosures (before, during and after your evaluation of the applicant) are in line, will go a long, long, way toward avoiding problems with this practice.

One final note, you should be sure you are pulling an "HR" credit report instead of a regular consumer report so that the individuals number of inquiries when applying for credit are not adversely affected by your inquiry for hiring.

Now that I've been typing for awhile I realize this might be a little too much emphasis but this just has to be a careful and well-handled process to be effective as a hiring tool. I always try to err on the side of too much information when it comes to something like this. x:-8

Jessica

MrCreosote

With Equifax the reports you can pull are "Employment Reports." You aren't supposed to run a "full" credit report that includes any kind of ranking for employment purposes.
Rough guidelines, subject to revision, for use:
1)Don't consider medical bills
2)Don't consider bankruptcies
3)Consider whether the information really has relevance to employment. An enormous amount of debt can lead to temptation. A history of bouncing checks is not good in a teller. But if someone had a dispute over the cable TV bill five years ago, who cares?

cthr

We are a Credit Union and we do not pull credit, we do however run a state and federal criminal background check. You want to be careful with credit checks, if you are refusing employment to a large number of "protected" employees because of bad credit it could be considered discrimination. A person's credit history doesn't impact their ability to do the job.

WOCO Frank

>A person's credit history doesn't impact their ability to do the job.

Maybe not, but it often reflects undesirable traits that will impact their job performance. The two main personality characteristics reflected on credit reports are punctuality/procrastination and ability to prioritize responsibilities. Bad credit is often a sign that an individual is unable to prioritize and/or has a procrastination issue.

The bottom line, as I tell candidates before I run the credit report:

If you can't handle your own money, chance are I don't want you handling ours.

Trinity

I work for a credit union and we do the same thing. The reason we run a credit check is because our employees are covered by an insurance bond, in case of theft and such. Therefore, to satisfy the coverage requirements for a financial institution, our employees need to have good credit.
Sometimes, I see this as unfair, especially if credit problems are due to medical bills and have talked to our bond company about certain exceptions, but as a whole we follow this practice..

WOCO Frank

For the most part, we don't consider medical bills. Most of that comes from our experience on the benefits end, in which we see insurance snags turn into calls from collection agencies, etc. We see too much heavy-handed garbage from medical providers to feel comfortable about penalizing people on it.