Does Bad Credit = Dishonest Employee?

More and more industries are starting to include credit checks on all their applicants as a part of their qualification process. Does bad credit mean one is more likely to steal from the company, leave or be terminated?

A colleague of mine has been struggling with this process quite a bit recently. Not because he has poor credit, but because the company he works for will not allow him to hire, much less interview anyone whose credit is below 650. There are other stipulations too;
  • no late payments on any bill in the last 30 days,
  • no bank overdrafts within the last year, and
  • need to show that they have kept a minimum balance in their checking account for the last year.

Protecting the Customer

On the company's side, these requirements are not uncommon for any organization that has fiduciary responsibilities. They have a responsibility to handle, invest and direct their customers money with honesty and transparency. But does this mean that someone who has fell on hard times is more likely to misappropriate funds or steal from their customers?

Industries that require these checks for employment cannot take any chances on whether a person's integrity goes beyond their financial records. There cannot be the slightest feeling of unease regarding their employees ability to handle large amounts of cash responsibly. Unfortunately, interviews and references are not a reliable enough source to determine how someone will act when handling their customers investments. It appears the only way to get any qualitative evidence is in hard numbers. If they don't respect their own money, how can one be sure they will respect their customers'?

Consider the Economy

In the last 5 years, tens of thousands of Americans who keep perfect credit and their accounts balanced in a "normal" economy have had the rug pulled out from under them. Mass lay-offs, forced retirement, downsizing etc. So many people have lost their jobs due to circumstances out of their control. Many of them were ideal employees who were expecting to stay at their company for years. Do these types of employment screenings perpetuate hard times?

The trickiest part of this whole thing is that the quality trying to be defined is actually personality. Companies that screen applicants based on credit and the like, do so to determine the candidates level of honesty, integrity and trustworthiness. It appears credit is starting to define more than how big of a loan one can get.

So where do you stand?

Does your company or do your clients require you to provide this information from all applicants? How do you feel this affects the still wounded job market?


Louis Bina is the Marketing Manager for CATS Software, Inc.

Views: 376

Comment by Keith Gorman on August 3, 2011 at 8:53am

Les Rosen is on point.  Anyone using credit scores is walking on thin ice and could find themselves in a legal bind.  Credit checks are appropriate for some positions and for some specific industries. However failure to follow correct protocols or misuse of the data (and depending on the situation, misuse could be simply using a credit check at all in the hiring decision) can result in serious consequences for the company.

Anyone considering using credit checks for purposes beyond allowing a background company to identify where the applicant has lived (which is what most background companies actually use the credit check for - your charge company knows everywhere you've been) should take the time to read up on the pro's and con's, and more importantly analyze why you think you need the data and what the ramifications could be i.e. will you create disparate impact or is it even reasonable. The bottom line is this a very big decision and the person implementing it should consult with an experienced HR professional and a labor attorney before concluding it's direction they want to go in.

Comment by Louis Bina on August 4, 2011 at 5:58pm
Thanks for the great discussion everyone. It was a good mix of information and opinion that was very professional throughout. I have my work cut out for me on my next article!


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