Key Points About a Pre-Employment Credit Check

19th Nov 2024

In the UK, a growing number of job candidates are being rejected due to poor credit, debt issues, and inadequate financial management.For many positions in banking and finance companies, a pre-employment credit check is a standard step in the interview process. Other companies may also choose to run credit checks, but many candidates are unsure about the purpose of the process and what it involves.

Why Do Employers Perform Credit Checks?

Until fairly recently, credit checks were mostly reserved for financial companies. However, more businesses across various industry sectors are using them today to try to minimise the risk of hiring a fraudster. Employers typically look for two things during these checks:

·        Identity Verification: Confirming that the information you've provided matches your credit report.

·        Financial History: Assessing your financial management history.

The second point is particularly crucial. While it might not directly relate to the job, employers may view significant debt as a potential risk, which could increase the chance of someone being tempted to steal or commit fraud. A good credit history, with consistent on-time payments, means an employer will see you more positively. A less-than-perfect credit score does not automatically disqualify you from employment as each company makes its own decisions on who to recruit.

What Does a Credit Reference Check Include?

A typical pre-employment credit check reviews both private and public databases to search for any financial problems such as insolvencies, bankruptcy, CCJs (County Court Judgements) or voluntary debt arrangements. Usually, an employer will make a job offer conditional on the credit check being successful; recruiters don’t have the time to run credit checks on everyone who applies for a job with them.

Getting Ready for a Credit Check

You can check your credit score online for free using services like Experian. Many candidates may not realise that potential employers might check their credit, even though employers need to get your permission to do so. It’s advisable to monitor your financial health regularly and all credit scoring companies let you download an app or register an account on their website to track how your score changes over time.

Will a Credit Check Affect My Credit Score?

When employers run credit checks, these are recorded on your report, but they generally don't affect your credit score. For employment purposes, employers typically conduct soft credit checks, which do not affect your score. Importantly, they must also get your permission to run credit checks and tell you that they are going to do them.

While it's important to understand what pre-employment credit checks are and how they work, employers do not automatically reject candidates based on imperfect credit histories. They are really only trying to weed out the people with the worse credit records to protect their business from potential fraud. If however you feel that you are losing out on job opportunities because your credit record isn’t as good as it could be, then there are simple steps you can take to improve matters and widen the list of potential jobs which might be open to you.