Credit Report Articles

Employers May Use Credit Reports To Determine Honesty

Many companies admit to examining an applicant's credit report to gauge their level of responsibility and trustworthiness, but what about honesty?

Employers have been using a consumer's credit report as an indicator of how well they meet their financial obligations, which may determine how their level of responsibility will carry over to work-related tasks. In addition to pulling a credit report, many organizations - especially banks and other financial institutions - run a background check on their employees to find out whether they have prior arrests or other run-ins with the law that may pose a red flag to employers. However, a recent MSNBC report revealed that some employers read into an applicant's credit file to determine how honest they may be.

The line of thinking is, if they do not pay their bills on time or have previous liens and judgements on their file, they may be more likely to commit financial crimes against the company, the news organization explains.

"They're looking at the debt level compared to the potential income from the job," Employment Screening Services CEO Lester Rosen told MSNBC. "If someone is under water financially as shown by the credit report, the thought is perhaps there could be a motive to embezzle or steal."

Rosen added that using an applicant's credit file as an indicator of honesty may also protect the company in the event of a lawsuit. If the employee does end up stealing or embezzling, the hiring managers can prove that they utilized all their options to determine the employee was trustworthy, including their credit file, Rosen told the news organization.

However, many consumer advocates have long discouraged the use of credit reports during the hiring process as a determination of an applicant's employability. This is especially true today, when the current economic climate has forced many Americans into unemployment, foreclosure and bankruptcy at no fault of their own. Recent reports reveal that a large number of personal bankruptcy and foreclosure filings are the result of medical emergencies and long-term job loss, rather than excessive spending and financial irresponsibility.

Consumers with negative information on their credit file - especially those relating to medical expenses and other unexpected financial emergencies - should consider including a personal statement of 100 words or less on their credit file explaining their circumstances. This may sway an employer to take a second look at their eligibility.