Why companies do credit checks on prospective employees

You might have thought that applying for a personal loan was the only reason for a company to cast its razor-sharp eyes over your credit history. But if it’s a new job you’re seeking, there’s a chance you’ll be asked by your prospective employers if they can also conduct a credit check when considering you as a candidate.

You’re probably wondering why an employer would ask this of you. Of course, if you were seeking employment in the financial sector then such a request would be perfectly understandable. According to the Credit Ombud, “the National Credit Act (NCA) makes provision for employers to check a candidate’s credit status when they are applying for a job that requires trust and honesty and entails the handling of cash or finances.” It has now become commonplace, however, for companies of any description to request a credit check. Do note that, thanks to the credit ombud, this can be done only with your formal consent.

The reasons for these credit checks are varied. Perhaps the most straightforward is the routine background check all employers implement when screening candidates. Sam Griffin at checkmyfile.com states, “for most employers they will use a credit search simply to verify that you are who you say you are.” Writing for The Balance Careers, Alison Doyle says “the [employment credit] report includes identifying information, including your name, address, previous names and addresses” Regarding the means of obtaining said report, she explains, “employers typically use a third-party company to provide them with an employment credit check on a job candidate. This credit check will result in an employment credit report.”

But in assessing a candidate’s financial situation in particular, one might be able to determine aspects of that person’s character, their personal context at the time of screening, and how that character and context will influence their performance at work. An irregular credit report can highlight a person’s overall lack of responsibility, such as missed payments, a bankruptcy, or multiple judgements about you.

Having a history of financial difficulties doesn’t mean you’ll immediately be taken out of consideration. Griffin says, “most employers would likely be open to a dialogue about the circumstances leading to this however, and few are likely to turn you down solely for this information being present without wanting to discuss it with you first.” But there is the chance that the stress resulting from debt, missed payments and bankruptcy might impede upon a candidate’s ability to work at full speed. It’s something all parties should consider.

There are, however, many aspects of one’s financial situation that you thought might matter in terms of your employment but which actually don’t. Specifically, there are Five Things That Don’t Affect Your Credit Score in a professional context. If any of them apply to you, then cross them off your list of worries.

This article is for informational purposes only and should not be construed as financial advice.