Four things you need to know about pre-employment credit checks

If you’re applying for a new job, you may find that your potential employer asks if they can carry out a pre-employment Credit check. A bad credit report has become one of the most common reasons for potential employees to fail vetting checks and be passed over. 

To understand more about pre-employment credit checks and what they mean for you as an employee, we’ve put together the four most important things you need to know. 

What is a pre-employment credit check?

This is a financial check carried out by employers to find out about potential employees in relation to financial mismanagement. The checks are carried out primarily to ensure that the company hiring a new employee can reduce the risk of potential employee fraud and comply with the law.

One key point to note is that credit checks do not provide your employer with your credit score; they are only given a report on your credit history.

What does the pre-employment credit check look at?

There are four areas of your financial situation that an employee credit check will look at: 

  • Public information

This section will look at any public information available about a candidate, including Bankruptcies and Insolvencies (BAI) and Court County Judgements (CCJs).

In the UK, the information could come in the form of decrees, trust deeds, sequestrations, bankruptcies, IVAs, debt relief orders, and any CCJ records that date back as far as six years ago.

In Australia, information is gathered from the past five years, and includes judgements held against the individual, summons, bankruptcies, directorships and public record notices. This section will also clarify whether the judgements are still active or if they have been satisfied or discharged.

  • Credit search history

A credit search history check looks at all of the credit searches over both three-month and twelve-month periods. If the number of credit searches is high, this could indicate a considerable level of existing debt or a sudden requirement for debt-relief. 

  • Undeclared links

When your employer asks if they can pursue a credit check, they will ask you for your addresses from the last five to six years and any previous names you had, e.g. your maiden name. If you don’t declare all of your addresses and aliases, they will be found in this section when reviewing your credit check.

  • Electoral role confirmation

Part of your pre-employment credit check will involve confirming where you live, which can be done through your electoral role registration history. This will also allow an employer to confirm your previous addresses.

Why would your employer need to conduct a credit check?

If you’re applying for a job that involves handling money, checking or looking after accounts, or dealing with financially-sensitive data on a regular basis, an employer is almost guaranteed to carry out a credit check. It will help them reduce the risks that their business could face if they employed a candidate who is under financial strain.

While this check is most commonly used in the financial sector to reduce the risk of fraud, both the healthcare and engineering sectors are also starting to perform pre-employment credit checks more regularly.

How can you improve your credit screening?

If you want to make sure that your credit check shows you in the best light when applying for a job, there are some things that you can do to help. It’s important to keep track, and meet, all your monthly payments on time, and you can check your credit reports online. 

For employers, using can streamline your background screening, giving your full visibility over the status of all your checks and candidates. For more information, check out our website, or request a demo today. 

Written by the Team.

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