1. Background Checking: The Implications of
Credit Background Checks on the Decision to
Hire
September 22, 2010

2. Key Findings
• Do most organizations conduct credit background checks on all job candidates? Four out of
10 organizations do not conduct background checks at all, while 47% conduct background checks on
select job candidates. Only 13% of organizations conduct credit background checks on all job
candidates.
• Which factors have the most impact on hiring decisions? The three most influential factors for
recruiters in the decision to hire a job candidate or not are: 1) a “good fit” with the organizational
culture (85%); 2) previous work experience directly applicable to the job (82%); and 3) specific skills
expertise needed for the job (80%). Only 9% of recruiters reported that favorable credit background
check results were most influential in their hiring decisions.
• For which candidates do organizations conduct credit background checks? Primarily for those
candidates applying for positions with financial responsibility (91%); for senior executive positions
(46%); and for those positions with access to highly confidential employee information (34%). These
trends span across all industries, they are not unique to financial institutions. In other words, HR
professionals report using credit background checks for positions where this information is most job
relevant – regardless of industry.
• Do employers use credit background checks to screen out mass numbers of candidates in
the early phases of the application process? No; at least 87% of organizations initiate credit
background checks only after a contingent offer (57%) or after the job interview (30%). This finding
also substantiates the finding that organizations place relatively more importance on other job
relevant factors in making hiring decisions.
• Are credit background check results used as a definitive hiring criterion? No; 87% of
organizations report that they allow job candidates, in certain circumstances, the opportunity to
explain results.
Background Checking: The Implications of Credit Background Checks on the Decision to Hire| ©SHRM 2010 2

3. Key Findings continued
• Do all debt revealed from a credit background check results in the decision not to hire? The
top two situations that would impact an organization’s decision to NOT extend a job offer are: 1)
current outstanding judgments and 2) accounts in debt collection. For most organizations,
foreclosures, tax liens, education-related debt and medical debt do not play a major role in the
decision to not hire a job candidate.
• How far back is credit checked? When examining credit background checks, organizations focus
on long-term credit history, not short-term single events. Most organizations focus on credit history
between 4 to 7 years overall; 33% of organizations reported that up to 6 to 7 years of credit history
was most influential in their organization’s assessment of the job candidate’s credit standing, and
27% reported that up to 4 to 5 years was most influential. 17% of organization indicated all years of
the credit history are equally important.
• Why do organizations conduct credit background checks? The primary reasons that
organizations conduct credit background checks are: 1) to reduce/prevent theft and embezzlement
and 2) to reduce liability for negligent hiring.
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4. In general, when making a hiring decision about a job candidate, which
are the most important factors influencing the final decision to hire a
particular candidate over another?
A “good fit” with the organizational culture 85%
Previous work experience directly applicable to the job 82%
Specific skills expertise needed for the job (e.g.,
80%
technical skills, communication skills, etc.)
Performed very well during the interview (e.g., 67%
professional demeanor, good communicator, etc.)
Favorable reference background check results (e.g., 47%
verification of employment history, etc.)
Favorable criminal background check results (e.g., 44%
criminal history, etc.)
Education directly applicable to the job 35%
Certifications directly applicable to the job (e.g., CPA, 29%
PHR, PMP, etc.)
Favorable credit background check results (e.g., 9%
criminal history, etc.)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
•The three most influential factors in hiring decisions were: 1) a “good fit” with the organizational
culture (85%); 2) previous work experience directly applicable to the job (82%); and 3) specific skills
expertise needed for the job (80%). Only 9% of organizations reported that favorable credit
background check results were most influential in their hiring decisions.
Note: n = 518. Percentages do not total 100% due to multiple response options.
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5. In general, when making a hiring decision about a job candidate, which
are the most important factors influencing the final decision to hire a
particular candidate over another?
Comparison by Organization’s Region and Industry
• Favorable credit background check results (by region): Organizations in the Northeast (17%) were more likely
than organizations in the Midwest (6%) to report that favorable credit background check results are a most important
factor influencing the final decision to hire a particular candidate over another.
• Favorable credit background check results (by industry): Financial services organizations (48%) were more
likely than health care and social services organizations (4%), non-auto manufacturers (8%) or professional services
organizations (9%) to report that favorable credit background check results are a most important factor influencing
the final decision to hire a particular candidate over another.
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6. Does your organization, or an agency hired by your organization,
conduct credit background checks for any job candidates by reviewing
the candidates’ consumer reports?
•Four out of 10 organizations do not conduct background checks, while 47% conduct background checks on
select job candidates – those with financial responsibility, those applying for senior executive positions,
those with access to highly confidential employee information (see slide 6). Only 13% of organizations
conduct credit background checks on all job candidates.
All job candidates
13%
No, my
organization does
not conduct this
type of background
check for any of its
job candidates
40%
Select job
candidates
47%
All job candidates
Select job candidates
No, my organization does not conduct this type of background check for any of its job candidates
Note: n = 343
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7. On which categories of job candidates does your organization conduct
credit background checks? (Select Job Candidates)
•Primarily for those candidates applying for positions with financial responsibility (91%); for senior executive
positions (46%); and for those positions with access to highly confidential employee information (34%) are
among the job candidates that organizations select for credit background checks. These trends span across
all industries, they are not unique to financial institutions.
Job candidates for positions with fiduciary and financial responsibility (e.g., handling cash, 91%
banking, accounting, compliance, technology)
Job candidates for senior executive positions (e.g., CEO, CFO, CHRO, etc.) 46%
Job candidates who will have access to highly confidential employee information (e.g., salary, 34%
benefits, medical information or other personal information about employees, etc.)
Job candidates who will have access to company or other people's property or otherwise 30%
placed in a position of financial trust (e.g., information technology, administrative services, etc.)
Job candidates for positions for which state law requires a background check (e.g., day care 11%
teachers, licensed medical practitioners, etc.)
Job candidates who will have security responsibilities (e.g., security guards, etc.)
9%
Job candidates for positions involving national defense or homeland security 8%
Job candidates who will be employed in safety-sensitive positions (including operating heavy 5%
equipment, transportation, etc.)
Job candidates who will work with children, the elderly, the disabled and other vulnerable 3%
populations
Job candidates who will work in health care or with access to drugs (e.g., hospitals, nursing 3%
homes, clinics, pharmacies, rehabilitation centers, etc.)
Other
4%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Note: n = 158. The data in this figure represent organizations that conduct credit background checks on select job candidates. Percentages do not total to
100% as respondents were allowed multiple choices.
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8. What is the primary reason that your organization conducts credit
background checks on job candidates?
•The primary reasons that organizations conduct credit background checks is: 1) to reduce/prevent
theft and embezzlement and 2) to reduce liability for negligent hiring.
To reduce/prevent theft and embezzlement, other 54%
criminal activity
To reduce legal liability for negligent hiring 27%
To assess the overall trustworthiness of the job 12%
candidate
To comply with applicable state law requiring a 7%
background check for a particular position
0% 10% 20% 30% 40% 50% 60%
Note: n = 195
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9. In general, if a credit background check revealed information that presented
the job candidate’s financial situation negatively, what types of information
are MOST likely to affect your decision to NOT extend a job offer?
Current outstanding judgment(s) (e.g., lawsuit filed in 64%
court)
49%
Accounts in debt collection
25%
Bankruptcy
18%
High debt-to-income ratio
11%
Foreclosure
Tax liens 10%
Education-related debt 2%
Medical debt 1%
Other 3%
0% 10% 20% 30% 40% 50% 60% 70%
• When examining credit background checks, organizations focus on long-term credit history, not short-term single
events. Among organizations that conduct credit background checks for job candidates, 33% reported that up to 6 to
7 years of credit history was most influential and 27% reported that up to 4 to 5 years was most influential (see slide
12).
Note: n = 201. Percentages do not total to 100% as respondents were allowed multiple choices. Respondents were asked to select their top two
options.
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10. When does your organization, or any agency hired by your organization,
initiate credit background checks on job candidates?
After a contingent job offer 57%
30%
After job interview but before a job offer
Varies by job level 9%
After the completion of a job application but before job 3%
interview
1%
Other
0% 10% 20% 30% 40% 50% 60%
Note: n = 199
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11. Does your organization allow job candidates, in certain circumstances,
the opportunity to explain the results (e.g., high debt, bankruptcy, etc.)
of their consumer report that might have an adverse effect on an
employment decision?
•Before the decision to hire or not has been made, 65% of organizations allow job candidates to
explain the results of their credit background check (obtained via their consumer report). Twenty-
two percent allow job candidates to explain after the decision to hire or not hire has been made.
No, not at any time,
13%
Yes, after the
decision to hire or
not hire has been
made Yes, after the credit
22% background check
is conducted but
before the decision
to hire or not hire
is made
65%
Yes, after the credit background check is conducted but before the decision to hire or not hire is made
Yes, after the decision to hire or not hire has been made
No, not at any time
Note: n = 197
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12. In general, when conducting a credit background check on job
candidates, how many years of credit history are most influential in
your assessment of the job candidate’s credit standing?
•When examining credit background checks, organizations focus on trends of financial behavior. In fact,
organizations indicated that current outstanding judgement(s) (64%) and accounts in debt collection (49%)
has the greatest impact on final hiring decisions (see slide 9). Both of these situations are synonymous
with financial issues that have remained unresolved for longer periods of time.
Up to 10 years or more 5%
Up to 8 to 9 years 3%
33%
Up to 6 to 7 years
Up to 4 to 5 years 27%
14%
Up to 2 to 3 years
0%
Up to 1 year
17%
All years are equally important
0% 10% 20% 30% 40%
Note: n = 230. Excludes respondents who indicated, “N/A, my organization does not conduct credit background checks for any of its job candidates."
Percentages do not total 100% due to rounding.
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13. When conducting credit background checks on job candidates, in
general, how many years of credit history does your organization check
by job level?
2–3 4–5 6–7 8–9 10 years
1 year
years years years years or more
Executive/upper management (e.g., CEO, CFO) 0% 0% 16% 50% 11% 23%
Other management (e.g., directors, managers) 0% 0% 18% 55% 11% 16%
Nonmanagement, salaried employees 0% 2% 16% 56% 12% 14%
Nonmanagement, hourly employees 0% 2% 17% 55% 12% 14%
Note: n = 45. The data in this table represent organizations that conduct credit background checks on all job candidates. Respondents were asked to
round up to the highest year.
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14. When conducting credit background checks on job candidates, in
general, how many years of credit history does your organization
check?
2–3 4–5 6–7 8–9 10 years
1 year
years years years years or more
Job candidates who will work with children, the elderly, the disabled
0% 0% 0% 100% 0% 0%
and other vulnerable populations
Job candidates who will have security responsibilities (e.g., security
7% 7% 0% 79% 0% 7%
guards, etc.)
Job candidates for positions involving national defense or homeland
0% 0% 9% 64% 0% 27%
security
Job candidates who will have access to highly confidential employee
information (e.g., salary, benefits, medical information or other 2% 12% 12% 61% 2% 12%
personal information about employees, etc.)
Job candidates for positions with fiduciary and financial responsibility
(e.g., handling cash, banking, accounting, compliance, technology, 1% 6% 16% 61% 1% 16%
etc.)
Job candidates for senior executive positions (e.g., CEO, CFO, CHRO,
0% 3% 9% 61% 1% 26%
etc.)
Job candidates who will have access to company or other people's
property or otherwise placed in a position of financial trust (e.g., 0% 14% 14% 59% 0% 14%
information technology, administrative services, cleaning crews, etc.)
Job candidates who will be employed in safety-sensitive positions
0% 13% 0% 50% 0% 38%
(including operating heavy equipment, transportation, etc.)
Job candidates who will work in health care or with access to drugs
(e.g., hospitals, nursing homes, clinics, pharmacies, rehabilitation 0% 25% 0% 50% 0% 25%
centers, etc.)
Job candidates for positions for which applicable state law requires a
background check (e.g., day care teachers, licensed medical 0% 0% 0% 50% 0% 50%
practitioners, etc.)
Note: n = 4-138. Percentages may not total 100% due to rounding. The data in this table represent organizations that conduct credit background checks on
select job candidates. Data sorted by the 6–7 years column. Respondents were asked to round up to the highest year.
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15. Background Information on Credit Background Checks
• Many employers conduct some kind of background check on job applicants and/or employees.
Background checks may include verification of educational or professional history, contacting
references, obtaining a report on an individual’s criminal history, and/or obtaining a report on an
individual’s credit history.
• The Fair Credit Reporting Act (FCRA) authorizes employers to obtain a consumer report for
“employment purposes” from a consumer reporting agency (CRA) so long as certain disclosure
requirements are met. The term “employment purposes,” means a report that is used for the
purpose of evaluating a consumer for employment, promotion, reassignment or retention as an
employee.
• For some employers, credit payment records serve as a factor in evaluating an individual’s
suitability for a job, while others seek information on driving records, criminal histories, or other
background information. All of these types of reports are considered consumer reports if they are
obtained from a CRA.
• Before procuring a consumer report, FCRA requires employers to clearly disclose, in writing, that a
report may be obtained for employment purposes and get written authorization from the individual.
FCRA also requires that the employer provide the individual with a copy of the report and a written
description of the consumer’s rights before taking any adverse action based in whole or in part on
the report.
• The Federal Trade Commission website has additional information on the rights and duties imposed
by the Fair Credit Reporting Act at (www.ftc.gov/os/statutes/fcradoc.pdf)
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16. Background Checking: The Implications of Credit Background
Checks on the Decision to Hire or Not to Hire
Methodology
These results summarize two research studies on credit background
checks – the Background Checking: Conducting Credit Background
Checks data findings which were released January 2010 and a SHRM
Poll that was conducted in June 2010 with HR professionals in the
employment and recruitment functional area.
For more poll findings, visit:
www.shrm.org/surveys
Follow us on Twitter:
http://twitter.com/SHRM_Research
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