Can we require a credit check when we look to hire new employees?

[matt30577]

I know there's the criminal record check, previous job checkup, good resume requirement, etc, but what about being able to check the employee's credit history.

A lot of major corporations are requiring that along with the other checks when hiring new employees. I see that their angle of reasoning on this is very important. They like to see how well the person has discipline in handling their money. If they have the strict mindset in doing that, then they should be better at handling their task working with you.

So are we legally able to do this check on the job application?

 

[TimM]

Why would you do that? What does a persons credit score have anything to do with how they will be an employee?

 

[matt30577]

Why would you do that? What does a persons credit score have anything to do with how they will be an employee?

Think about it. If someone isn't mature enough to make the payments, or have enough discipline to not max out 5 or 6 credit cards on shopping sprees at the mall...how can they have enough discipline to be a good employee? A lot of the big corporations in this country are making that a requirement before they hire

I know we all have rough times in our lives that we get behind on some loans and credit cards (I'm one of them), but when it's a pattern over 5-10years...that tells us a lot about their actions

 

[TimM]

so what happens when a 22 year old comes to you and he has a 400 credit score, he has worked for the same company for the last 4 years? He only has one credit account and because his current boss has been screwing around with his pay the kid has been late on a few payments so his credit score sucks now, does that mean you are not going to hire him?

 

[Kipp]

If most carpet cleaners did this they couldn't even past their own test...

 

[matt30577]

so what happens when a 22 year old comes to you and he has a 400 credit score, he has worked for the same company for the last 4 years? He only has one credit account and because his current boss has been screwing around with his pay the kid has been late on a few payments so his credit score sucks now, does that mean you are not going to hire him?

That makes the credit check useless just because he's so young. That's where the work history is more valuable than the credit history.

What about a 45year old person with the same credit score? Wouldn't that give you a little more information about their history and habits?

 

[matt30577]

http://jobsearch.about.com/od/backgroundcheck/a/credithistory.htm

 

[TimM]

That makes the credit check useless just because he's so young. That's where the work history is more valuable than the credit history.

What about a 45year old person with the same credit score? Wouldn't that give you a little more information about their history and habits?

ok, lets say the 45 year old has been working for the same company for 20 years, has paid cash for everything, saved and paid cash for his small house so he has NO credit score, then he decides to be like everyone els in Merica and gets a credit card. He is late on a payment, so now he has a shitty credit score because he has one credit card with a late payment on it, but has never missed a day of work in his last 20 years at his job. so you wouldnt hire him?

 

[TimM]

I guess the point I am trying to make is just because someone has a bad credit score, it does not mean he is a poor employee, it is just a very small piece of the puzzle.

 

[matt30577]

ok, lets say the 45 year old has been working for the same company for 20 years, has paid cash for everything, saved and paid cash for his small house so he has NO credit score, then he decides to be like everyone els in Merica and gets a credit card. He is late on a payment, so now he has a shitty credit score because he has one credit card with a late payment on it, but has never missed a day of work in his last 20 years at his job. so you wouldnt hire him?

Then we should know how to look at someone's credit History and not just the score. I never said I wouldn't hire someone who has bad credit. I said looking at their credit history might give us more information about what type of employee they'll be.

There's nothing but complaints I read on here about people having trouble finding good employees.

I thought this might help us find more accurate information about the people that apply for a job.

 

[TimM]

To give you another example, I have a friend, just married, bad credit score he is in his mid 30's has a little 1 year old, he is probably the most devoted worker at his job, he has a team member, same age married a few kids, is always bragging about his high credit score, is maxed out on every credit card living in a nice house well beyond his means, but is one of the laziest persons I have ever seen or met.

 

[matt30577]

If we're wanting to just hire a kid to manage our hoses and push a vacuum, then the credit app isn't needed.

If we're wanting to hire someone long term full time and pay them $15-$20/hr...then I think this is needed

@Steve Toburen what's your input on this matter?

 

[matt30577]

To give you another example, I have a friend, just married, bad credit score he is in his mid 30's has a little 1 year old, he is probably the most devoted worker at his job, he has a team member, same age married a few kids, is always bragging about his high credit score, is maxed out on every credit card living in a nice house well beyond his means, but is one of the laziest persons I have ever seen or met.

Then that's where the job resume work history is more valuable.

I'm not saying to make credit history the main decision. I'm just saying that it will work side by side with the work history. You look at both of them, and if both are good, then odds are, there's a better chance at this person being profitable to your business

 

[longkenn]

There is currently legislation working its way through the system that would prohibit using credit reports in the hiring process except in very limited circumstances such as background checks for security clearances having to do with national security. Some states limit the use as well. The best thing to do is to consult an attorney to find out if you can use it.

Also, just my personal opinion, it is pretty much useless for hiring a tech. It might be slightly useful if you have someone that is handling very large amounts of money.

 

[mathis1]

Tim's points and examples or correct, I believe that companies use credit scores to eliminate the field they are picking from, a persons work history and criminal history is what you should worry about, keep in mind our business is based primarily on the trust factor( they trust u in theyre home, trust u and your employees around they're women folk and most of all they trust that you or your tech ain't gonna steal any thing) and you gotta trust your tech with your equipment, they best employee I ever had was and exconvict female that was honest up front about her past and she ran circles around my guys ,,, I hate she moved

 

[longkenn]

If we're wanting to just hire a kid to manage our hoses and push a vacuum, then the credit app isn't needed.

If we're wanting to hire someone long term full time and pay them $15-$20/hr...then I think this is needed

@Steve Toburen what's your input on this matter?

Most credit issues are caused by medical costs or illness. If you limit your hiring based on a credit report, you are going to eliminate a good percentage of people who might otherwise be great employees. For instance, my credit history is spotless, however, I was about two weeks away from filing bankruptcy due to medical bills that resulted from my wife's treatment for cancer.

Now that my wife has gone back to work, we are once again able to save money for the next emergency that is sure to come up.

 

[matt30577]

Most credit issues are caused by medical costs or illness. If you limit your hiring based on a credit report, you are going to eliminate a good percentage of people who might otherwise be great employees. For instance, my credit history is spotless, however, I was about two weeks away from filing bankruptcy due to medical bills that resulted from my wife's treatment for cancer.

Now that my wife has gone back to work, we are once again able to save money for the next emergency that is sure to come up.

That's a great way to look at it also. I never thought of limiting it based on a credit report only. @TimM gave a good illustration of it being another piece of the puzzle. If we're legally able to do this, wouldn't you want as many pieces of the puzzle as possible, if you're looking to hire someone to represent your company and handle your customer's checks and credit cards when they go in their home without you?

 

[Nomad74]

FICO is a myth. FICO is a company that spends millions on marketing every year. They need people to think that the FICO score is important, because every-time you run a credit report, FICO makes money. Yes,good credit can be a tool in determining weather or not someone would be a good risk, but it should not be the stand-alone tool in decision making.

 

[shane deubell]

Have to check with your state matt, federal govt has more vague laws when it comes to labor law. Each state then can add on to it.

Not sure its worth it for these positions except in extremes, maybe worst/best 5% or something. Someone with a terrible history i would want to stay away from and someone with a perfect score might want to look at more closely. The middle wouldnt be helpful to me.

Its tricky though because bankruptcy can come from personal problems like medical, divorce, failed investments.
That doesnt have anything to do with job performance.

I know plenty of people who are stellar employees but their personal life is a serial trainwreck.

 

[Steve Toburen]

If we're wanting to just hire a kid to manage our hoses and push a vacuum, then the credit app isn't needed.

If we're wanting to hire someone long term full time and pay them $15-$20/hr...then I think this is needed

@Steve Toburen what's your input on this matter?

Thanks for thinking of me, Matt!

I did run credit checks just to get an overall view of the applicant. However, as Shane mentions: I know plenty of people who are stellar employees but their personal life is a serial trainwreck. Tough call.

Steve

PS Matt, I will respectfully disagree on your "If we're wanting to just hire a kid to manage our hoses and push a vacuum, then the credit app isn't needed." I always hired for the "ghost position" as in even though I wouldn't tell the applicant I was evaluating (even "hose pullers") to see if they at least had the desire/potential to advance.

A small company can't afford to have marginal people taking up space! HERE are more ideas on hiring.