The use of credit checks to screen candidates is on the rise in Canada. The practice has dropped in the United States over the past few years with some states petitioning to ban the practice. Are credit checks necessary anymore?
This practice is common in the financial industry and for top executive roles. Many companies use the two leading credit check companies of TransUnion and Equifax. Credit checks are also mandatory for all levels of security clearance within the federal government of Canada as a result of the Standard on Security Screening since October 2014.
If your organization is considering performing credit checks for all roles, consider the points below.
Reference Checks
Some companies use the practice of credit checks to confirm previous employment. Through a detailed reference check you are able to determine whether the candidate is truthful and accurate about their previous employment.
Deeper Interview Questions
Employers should ask deeper interview questions to fully understand the candidate’s personal and financial history. Getting to know the candidate can help make an informed hiring decision as well as removing the need for a credit check. This would also give the candidate an opportunity to explain their situation if they know their credit score is poor.
Last step before hiring
A credit check should be the last process before an offer is put forward. It is best practices for every employer to get the consent of the employee before performing a credit check. Credit checks should not be used to weed out a list of potential candidates before the interview stage.
Consider hiring a candidate with a poor credit score
The Society of Human Resource Management (SHRM) 2012 U.S. survey states that 80 percent of respondents have hired someone despite a poor credit report. The poor credit score may not be a reflection of how well a candidate can perform their job duties. There could be any number of factors why a candidate has a poor credit history. The recession may have resulted in the candidate losing their job and therefore getting behind in their payments. Alternatively a poor credit score could be a result of divorce, illness, paying for a dependent’s college tuition or caring for aging parents.
Guidelines on when to decline a candidate
If you adopt a standard of performing credit checks on candidates then develop guidelines or a policy on when an offer will not be extended to a candidate with a poor credit score. This will help the hiring manager explain to the candidate why they were declined and allow the same standard for every candidate.
For most organizations the practice of credit checks for candidates is not necessary. The above gives you some points to discuss with your team if you are thinking about implementing this practice.
Human Edge Global is a quality-first, relationship centered retained search firm with locations across Canada. We help clients recruit the very best candidates for their executive, professional and technical teams. To find out more about how we can help you compete for and attract the best talent in your industry, please contact us.