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What Kinds of Financial Background Checks Are There?

By Michael Klazema on 6/7/2018

If your business is in the process of filling a position that involves access to sensitive financial information, company accounts, or other financial documents and resources, then a financial background check is something you will likely consider. While a criminal history check will hopefully help you spot the biggest red flags in this category—such as convictions for embezzlement or identity theft—even candidates with a clean criminal record could pose a risk to your organization.

A financial background check can be extremely valuable. Typically, a financial background check is not a check that looks for financial crimes: criminal infractions will show up on a thorough criminal history check. Instead, a financial background check is meant to assess a person’s financial responsibility by looking at how they manage money in their day-to-day life.

In most cases, when someone uses the term “financial background check,” they are referring to a credit history check. Employers do not see credit scores on these checks, but they can learn details such as highest credit extended, limits on different credit lines, average monthly payments, balances, past due amounts, and percentage of credit still available. A credit or financial background check may also yield information about civil suits or judgments, bankruptcies, accounts in collection, collection amounts, and tax liens.

If you are considering running a credit history background check on a job candidate, be aware this type of screening is not legal everywhere. In several jurisdictions, such as Washington DC and Philadelphia, there is legislation that bars employers from inquiring about applicant credit information unless certain exemptions apply. Other cities and states have adopted similar laws or ordinances.

The argument is that someone can have a poor credit record for reasons that have nothing to do with financial irresponsibility, so using this information as a bar to employment is unfair, irrelevant, or even discriminatory. To find out if your city or state has any restrictions on the use of credit history checks for employment purposes, read our white paper on the matter.

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