Credit Checks for Employment: FAQs

It’s becoming increasingly common for employers to perform pre-employment credit checks, even if they’re not legally required to. Some types of financial companies, such as solicitors, have a legal requirement to conduct pre-employment credit checks, but most other businesses have no such legal obligation.

The number of UK workers being rejected from potential positions is on the rise, with bad credit, a history of debt and poor money management being the main reason they fail their pre-employment background screening checks.

To help clear any confusion about the pre-employment credit check process, we’ve outlined five key things you need to know about them. These are common questions we’re asked as a background screening agency, and hopefully, our answers will be of value to you.

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Why Do Employers Perform Credit Checks?

Historically, credit checks for employment were purely reserved for financial companies, but more companies across different industries are using them nowadays. 

Companies generally look for two things when conducting employment credit checks:

  1. That you are who you say you are, by confirming your identity and details provided with what’s in your credit report.
  2. A history of poor financial management.

The second indicator is particularly salient. While it may not be relevant to a specific job role, employers could view large amounts of debt as a risk. They may believe you to be more likely to commit fraud or money laundering.

Good credit history and evidence of making payments in full and on time may send positive signals to potential employers.

However, each hire is at the discretion of every employer, and credit checks simply boil down to numbers and not context. Therefore, it won’t necessarily be a judge of character, so even if your credit score is not perfect, that doesn’t automatically disqualify you from successful employment.

What is looked at in a Credit Reference Check?

A typical pre-employment credit check will check private and public databases for evidence of the following:

  • CCJs (County Court Judgements)
  • Bankruptcies
  • Insolvencies
  • Voluntary arrangements
  • Administration orders
  • Evidence of money laundering
  • Notices of Correction

A credit check for employment will also likely look at a candidate’s Electoral Roll registration to confirm their address.

When Will Employers Check My Credit?

When candidates apply for a job in the financial sector, such as with law firms, the employer often has a legal requirement to conduct a credit search. However, it’s often standard for other organisations to run these on potential employees nowadays as well.

The decision to perform any non-obligatory background check rests solely with the hiring organisation. Whether it takes place before (most likely) or after a contract of employment is offered is entirely up to them.

What Can You Do to Help Your Credit Check?

It’s easy to check credit scores online for free using services like Experian. It may not have ever crossed a candidate’s mind that a hiring organisation would ever check their credit score, which is why it’s recommended that individuals keep a close eye on their financial health.

There is no standardised approach to pre-employment screening checks; requirements can considerably change between organisations. However, simple things to keep a healthy credit score can include:

  • Meeting regular payments on time
  • Not falling into arrears
  • Not taking out a surplus of credit cards, loans or finance

Employers will likely consider the rising debt levels across the UK due to economic factors out of candidates’ control.

Will a Credit Check Affect My Credit Score?

Whenever a company runs credit checks against you, they are recorded in your report, but it’s unlikely to affect your credit score.

It depends on whether a company conducts a soft credit check or a hard one.

As far as pre-employment screening goes, prospective employers will only run soft credit searches, which will not affect your score. 

Conversely, hard credit searches will only be conducted if you apply for credit, for example, from a lender, which will delve deeper into your full credit history. Multiple hard searches look unfavourable and can indicate financial difficulty. Successive hard credit checks can lower your credit rating.

Summary of Credit Checks for Employment

While it’s important to be aware of the impact of pre-employment checks, it’s worth knowing that employers won’t automatically dismiss candidates if their credit history isn’t perfect.

For peace of mind, don’t stress about achieving a perfect credit score. Taking small steps to improve your score could be the difference between a successful application and an unsuccessful one.

Background Check Solutions

To obtain a cost-effective, bespoke credit screening solution from a reputable background check provider, speak to Eurocom CI. However many employees you require to be credit checked, our software and packages can be tailored to suit your needs, whether you’re inside or outside the financial industry.

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