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Hiring, Candidate Screening and the Debt Dilemma

Posted on 8/12/14 9:15 AM

A core principle of an effective loss prevention program is the tenet to “hire right.” We can avoid many potential losses when we employ associates with the right experience, skills, and attitudes. One character traits ties that all together nicely - integrity. The importance of integrity and its usefulness as a differentiator becomes clear when we consider hiring a candidate. Consider candidate A who has a great amount of experience in banking, has a strong skill set that includes understanding of procedures, and loves working with money. Sounds perfect unless candidate A is actually acquired his experience, skills, and money-loving attitude as a bank robber.

Obviously, not all integrity issues can be determined with a criminal background check as most candidates will not, in fact, have ever committed a crime. Most of what we can learn about integrity and personal responsibility in advance of actually hiring is limited. For many years, companies relied on credit checks. The details of an individual’s credit report could often shine a light on the more irresponsible candidates. And although, 60% of companies still report using credit checks at some level of employment screening, in the post 2008 world, the reliability of such reports requires a bit more depth of review.

So let’s start with what a credit report can tell you, demonstrate today’s considerations, and then discuss the best way to balance a national financial crisis against an individual’s results.

Debt and Distraction: Attention to the work at hand is an important aspect of successful performance. A credit report that details a lot of debt and accounts in collections can certainly suggest that the potential employee is under a lot of personal stress. It’s not a reason to “not” hire, as a job with regular income will help the employee on the road to recovery, but an employer should consider the impact the situation might have on employee distraction.

History of Neglect: In a recent survey posted in USA today, we see that 35% of Americans have at least one account in collection. That means that 4 out of 10 candidates probably having something “negative” on his or her credit report. Not surprising considering the dramatic down-turn of 2008, the housing market, and a generally slow-to-recover economy. Such items may be of no reflection on a person’s sense of financial responsibility. In fact, some Congressional members and many states have proposed or enacted laws limiting the use of credit reports for hiring purposes. And even FICO has decided to remove medical debts and debts that have been settled, but still appear in details, from the calculation of credit scores. 



 Of course, the economy may be the reason for some issues, but isn’t the reason for all. A credit report can still provide useful information in terms of a person’s financial character. For example if there were issues in 2007, before the crisis, or if the individual has opened new accounts and defaulted on those. While we should not use any one item as a determining factor in employment, certainly persistent patterns can indicate the over-all behaviors of an individual.


Geography: A credit report can often provide a geographical foot print of a person’s residential history. A combination of multiple and moving addresses—say from state to state or region to region—coupled with a trail of unpaid bills can indicate a problem. Regardless of the cause of the problem or the problem itself, such consistent movements may indicate that the job they are applying for is intended as a very short-term endeavor.


Age: Age plays a significant role in credit reports as demonstrated by the chart below. On the one hand, lower scores are indicative of the manner in which scores are built. Such factors as amount of credit lines and length of credit history play a role in scoring. A younger candidate is already at a disadvantage by nature of their age. Individuals in their 30s and 40s face different challenges. Often events such as divorce or care of elderly parents can play a role in financial struggles and even bankruptcy.



If it sounds as if the use of credit reports for candidate selection is a large mess of “yes, but, what-if” that’s because it is just that. Credit reports are one piece of the big puzzle in hiring decisions and unless fiduciary responsibilities are the employee’s core function, then the information should be viewed in terms of the entirety of all the information we have on the candidate. 


Conversely, however, we should not completely dismiss the use of the information. A long sordid history of right-offs, adverse judgments, and multiple high-debt credit cards is a strong indicator of high stress and distraction at best and irresponsible actions at worse. The first step in “hiring right” is having an accurate snap-shot of the candidate and the follow up discussions to have before the candidate becomes employee.

 Authored by:

Ray Esposito   Ray Esposito

   Ray Esposito Linkedin

Loss Prevention Planning Guide  



Topics: Candidate Screening

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