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Financial Risk Search vs Employment Credit Report

The subject of using employment credit reports in the job application process has been in the news lately.

Currently ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington), the District of Columbia, and the cities of Chicago, New York City and Philadelphia have passed laws restricting the use of credit reports used by employers for employment purposes, with several more jurisdictions poised to join the trend.

The main reasons is that concerns have been raised by “Fair Hiring” advocacy groups that when credit reports are part of an employment background check, the information on the credit report may be used unfairly against the job applicant, possibly even resulting in discriminatory impact, regardless of the position type.

Chi Chi Wu, staff attorney at the National Consumer Law Center based in Boston called the practice of using credit checks for employment absurd. “Simply put, workers who lose their jobs are likely to fall behind on paying their bills due to lack of income,” she said. “If credit reports are used against them, these workers now find themselves shut out of the job market because they’re behind on their bills. This leads to a financial spiraling effect—the worse the impact of unemployment on their debts, the harder it is to get a job to pay them off.”

Wu added that credit reports were designed to predict the likelihood that someone will miss a loan payment, and not whether they will steal in the workplace. “The overwhelming weight of evidence is that people with impaired credit histories are not more likely to be bad employees or to steal from their employers,” she said.

Beyond the cities and states imposing restrictions on employment credit reports, Congress is considering legislation that would ban employment credit reports except when required by law or to obtain a national security clearance.

Additionally, there have been a slew of lawsuits recently against employers and background check companies related to employment credit reports for non-compliance, creating confusion over what is legal and what is not.

Lastly – employers that insist on using full credit reports must get credentialed by the credit bureau before they can order a credit report. The credentialing process typically takes 5 to 7 business days. You must submit answers to a comprehensive questionnaire that dives deep into your business financials, data security protocols and background on your executives, and then schedule and pass a site inspection at all locations where people can order them from.

Because of this public pressure, legislation and lawsuits, and credentialing hassles, we no longer offer employment credit reports.

The alternative that is preferred by many companies these days is to run a Financial Risk Search.

This search will reveal if the candidate has been sued for defaulting on any credit obligations, been involved in any civil court proceedings and/or filed bankruptcy.

This provides you with insight into their fiscal responsibility, without the additional risk or hassle associated with a full employment credit report.

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