Leave credit checks to MasterCard (Editor’s notes)

Credit score not the best 'litmus test' of candidate's trustworthiness

Credit checks as part of pre-employment screening for some positions have come under fire from Canadian privacy watchdogs (see “Tread carefully with credit checks: Privacy commissioner,” ) and there have been calls in the United States to ban the practice altogether.

What does a credit check really reveal about a job candidate? Mark’s Work Wearhouse, the subject of a privacy complaint in Alberta, said the information helps demonstrate how potential employees will handle financial responsibilities and whether they are at risk for committing in-store theft or fraud.

But assuming a worker is more likely to steal because he missed a Visa card payment is a bit of a stretch. While it seems logical someone with financial difficulties would be more tempted to steal or commit fraud if given the opportunity, a credit score isn’t the best litmus test.

Did the architects of the Enron and WorldCom fiascos have poor credit scores? Not likely. Did the ones in charge at Lehman Brothers, Citibank or Goldman Sachs have trouble obtaining an American Express card? Hardly.

There are a variety of reasons good people can run into bad financial trouble, especially in the current economy. A spouse could have lost a job, forcing her family deeper into debt or causing a missed credit card payment. Or, when a worker was first out of school and earning very little money, he may have had to run up debt to make ends meet.

In Wisconsin, one of the states considering a ban on pre-employment credit checks, state representative Kim Hixson drafted a bill after hearing the story of an auto mechanic who couldn’t find work after losing his job and running into financial problems. The mechanic was turned down for at least eight positions for which he had authorized the employers to conduct credit checks.

“If somebody is trying to get a job as a truck driver or a trainer in a gym, what does your credit history have to do with your ability to do that job?” Hixson told the Associated Press.

HR professionals have an arsenal of tools at their disposal to evaluate candidates. One of the best is references. Though many companies are loathe to give references — good, bad or neutral — the HR community should be fighting to improve that. An honest reference from a previous employer is arguably the most accurate assessment of a candidate.

And there’s no good reason not to give an honest reference. Stuart Rudner, a partner at Miller Thomson in Toronto who specializes in employment law and is a regular contributor to Canadian HR Reporter, has pointed out on a couple of occasions that, to his knowledge, there has never been a successful lawsuit against an employer for giving a reference, good or bad.

Criminal checks and education checks are critical tools HR can, and should, use as part of due diligence in almost every hire. But unless you’re looking for a CFO, or someone who really needs to be good with money, leave the credit checking to MasterCard.

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