In a recent report, 1923 job applicants were rejected for employment due to bad debt during the year up to July 2017. For all jobs in the financial sector, it is a legal requirement for all candidates to be subject to a credit check, but many employers are now extending the practice to other industries. Credit checking is fully legal as long as the company has permission from the candidate to carry out the check, and this is usually granted during the recruitment process.
Failing a credit check is now cited as one of the top 5 reasons for being unsuccessful at the vetting stage of recruitment, alongside unspent criminal convictions, false qualifications, disciplinary measures in previous employment, and exaggerated job titles on CV’s.
But with UK consumer credit debt currently at an all time high of £204 billion, people taking on debt just to cover daily expenses and students leaving university with record debt figures, a colourful credit file is becoming more and more common.
Many firms believe that candidates with a history of debt problems could be more likely to commit fraud in the future. Checking that staff members have a responsible financial management record and are not under any significant financial strain could protect your company from the cost of a desperate employee. There is also a risk factor from candidates who might have access to sensitive company data.
Credit checks can include basic searches of public data including court judgements (CCJ’s), Individual Voluntary Arrangements (IVA’s) and bankruptcies. More detailed credit checks are also available which will check the status of loans, credit cards and mortgages. Payment details are not disclosed under the Data Protection Act.
Not all debt should be considered bad or irresponsible, many people manage debt well. Only those with four or more defaults in the last 6 years would generally be considered a risk.
Aside from the financial sector, there are currently no legal requirements for credit checks in employment, but it is increasingly being considered best practice under due diligence, to ensure that the successful candidate is trustworthy and of sound financial character.