Credit Checks Help Employers Make Responsible Decisions

Credit checks of job applicants are a key tool for businesses and aren't being abused.

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The recent opinion piece on credit reports and employment tells only part of the story ["Credit Checks Are Kicking the Jobless When They're Down", 1/13/14]. It leaves out some very important details that should be considered in this debate, foremost of which is that employers use credit reports in a fair and responsible manner.

Studies have shown a correlation between using a credit report for employment purposes and employee theft and related behaviors. One study found a job applicant with a troubled financial history was almost twice as likely to engage in theft as an applicant who lacked any financial history issues.

The importance of this becomes evident in the context of another study released by the Association of Certified Fraud Examiners. It notes that employee thefts account for nearly $1 trillion annually. The top two red-flag warnings present in these crimes were instances where the individual was living beyond his or her financial means or experiencing financial difficulties. That's important because employee fraud and theft can very well determine whether a small business survives or not.

As for credit checks having become "a routine part of the hiring process," that's also untrue. A survey by the Society of Human Resources Management found that less than half of all employers conduct a credit background check on potential employees and no employer is using credit reports for all types of jobs. The use is very selective, responsible and most often focuses on senior management positions or employees with access to financial records, cash or confidential consumer data. Data gathered by CDIA shows that less than 10 percent of background screening reports issued by the nation's largest background screening companies include credit report data. Most importantly, 80 percent of employers indicate they have hired an individual who has negative financial information in his or her credit report. To quote the Society of Human Resources Management, "negative credit information is not often a barrier to hiring."

Finally, the data on credit report accuracy emphasize how both authors offer less than half the story, which is a disservice to your readers. The Federal Trade Commission report they cite confirmed that only 2 percent of credit reports contained errors that would impact on an individual's creditworthiness (e.g. serious errors). Even at that, these errors are resolved quickly and the federal law regulating use of credit reports by employers has unique protections for prospective employees when they are used.

It's always helpful when discussing an issue to do so with full transparency, something that was seriously lacking in the authors' opinion piece.

Best Regards,

Stuart K. Pratt


President and CEO
Consumer Data Industry Association
Washington, D.C.