Pre-Employment Credit Checks ~ 3 Points to Remember

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If you have been unemployed for some time and have struggled to pay your bills as a result, then those missed payments or defaults would appear on your credit report. The question then becomes could those negative marks stop you from successfully landing another job?

Some employers check job applicants’ credit reports as a part of their pre-employment background check protocol, however, this practice is not universal. The Society for Human Resource Management (SHRM) conducted a survey back in 2012 that concluded that roughly one-third of the U.S. employers surveyed conduct credit checks on some employees, and 13% conduct credit checks on all employees.

The experts say pre-employment credit checks are less common in Canada. However, if you are applying for employment within the federal government of Canada, you should know that credit checks are actually mandatory now for all levels of security clearance due to the Standard on Security Screening that came into force on October 20, 2014.

“Security screening is a fundamental practice that establishes and maintains a foundation of trust within government, between the Canadian government and its citizens, and between Canada and other countries,” says Lisa Murphy, Media Relations, Treasury Board of Canada Secretariat for the Government of Canada.

“The overall assessment of reliability considers an individual’s trustworthiness in the protection of government assets, information, and facilities.”

Whether applying for a public or private-sector job, here are three important points that you want to be aware of with respect to pre-employment credit checks.

  1. Employers have to get your permission first

Employers – whether or not a government entity, or a private company — should receive your written consent before they check your credit. If an employer requests permission to view your credit report, which raises considerations, Henry Goldbeck, President of Goldbeck Recruiting in Vancouver, suggests asking your hiring contact what they are looking for in a credit report.

If they are concerned about defaults or multiple late payments, and you missed one payment years ago, you may well have nothing to worry about.

However, if the issues are more serious, Mr. Goldbeck says it’s better to address them proactively than wait for the employer to bring it up.

In my humble opinion, the lesson here is to address any issues up front, and not give a prospective employer the opportunity to dig even further. In addition to taking action first, your proactive approach on the matter will very likely be respected and appreciated.

“If you recognize that the report will have negative information, the employer may just decline to move forward with your hire, and not give you the opportunity to present your case.”

Alternately, they may conclude that you were hiding something, which of course automatically puts you on the defensive when you are endeavoring to present your case.

Ms. Murphy advised that those applying for security clearance with the government would get the chance to respond to negative information on a credit report before a hiring decision was finalized.

  1. Pre-employment credit checks do not lower your credit score

Hard inquiries on your credit report (for instance, when you apply for an auto loan or a mortgage) immediately, but temporarily lower your credit score, however, pre-employment credit checks do not do so.

“Credit checks conducted for the purpose of security screening are masked so that a negative effect does not show up on the individual’s credit bureau file,” Ms. Murphy said.

  1. Credit checks are only one facet of the hiring process

Fortunately, credit checks are only one factor that prospective employers take into account.

“This is one part of a comprehensive assessment of information collected to determine reliability and trustworthiness,” Ms. Murphy said. The very fact that an employer is requesting a credit check may even be a positive indicator.”

“Typically, they are performing the credit check as one of the last hiring phases, which suggests they have decided they want to hire you,” Mr. Goldbeck said.

 

Supporting Article Research Sources: Credit Cards Canada

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