Are credit checks a helpful hiring tool?

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While the US is clamping down on candidate credit checks, the practice is becoming increasingly popular in Canada – but is it a form of discrimination or do they really help HR make better hiring decisions? HRM investigates.

Picking up pace

Made popular by the financial industry, the use of credit checks to screen potential employees has now reached the mainstream – even the federal government recently introduced mandatory checks for all public servants – but employees, and unions, aren’t happy.

Representatives have criticised the policy as “an unnecessary invasion of privacy” and expressed concern that it could be used in an arbitrary way.

The federal government defended the decision and Treasury Board spokeswoman Lisa Murphy said; “This practice is common in certain private industries to indicate excessive indebtedness that may increase temptation to commit unethical acts.”

Bad credit, likely criminal?

But does a history of debt point to a future of crime?

One study found a job applicant with a troubled financial history was almost twice as likely to engage in theft as an applicant who lacked any financial history issues,” said TransUnion Canada spokesperson Clifton O’Neal.

As one of the country’s leading credit-reporting agencies, TransUnion Canada vehemently supports the use of its data when determining a person’s employability – data which they say could save employers from making costly hiring mistakes.

“The top two red-flag warnings present in these crimes were instances where the individual was living beyond his or her financial means or experiencing financial difficulties,” O’Neal added.

But one Ontario jobseeker who recently had an offer rescinded by TD Insurance says he should not be labelled a thief just because of a poor credit report.

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