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Interpret the Consumer Credit History Report for Employment Purposes

Nowadays, many employers are using the information in the job candidate’s consumer credit history report to make a hiring decision.  In this article, we will share with you some of our insights for interpreting the information contained in the consumer credit history report.

First of all, we need to understand that every country has different credit history report vendors.  For example, the three credit history report vendors in United States are Equifax, Experian and Transunion.  Whereas, other countries might only have one vendor or a credit history database might not exist.  If majority of the citizen do not have a credit card and a bank account, what the point for having a credit history database? The concluding point is that every country would have a different credit history report and some not even have any.  Anyways, no matter which credit report you are looking at, they should more or less possess the following information:

• Current open account – One thing that you are able to view is the job candidate’s current open account.  Here, you should look to see if the job candidate is constantly having huge amount of late payments.
• Closed account – Another thing you will notice are the closed accounts.  Again, you should look closely to see if the job candidate has any late payment.  You should also be careful and see if there are any accounts closed with bad debt.  Some will also have a specific section for all the past due and bad debt accounts.
• Monetary related court record – This section exists in majority of the credit history reports around the world.  This section will often not appear at all if the job candidate did not engage in any monetary related court record.
• Bankruptcy record – This section also exists in majority of the credit history report around the world.  And, this section will also often not appear at all if the job candidate did not have any bankruptcy record in the past.  Please also note that many countries will restrict the reporting for this piece of information up to the past 7 years or less depending on the local privacy regulations.
• Credit Score – This is usually available in a credit history report.  However, credit score is calculated by a very complex formula and is constantly changing.  And, a new university graduate who might not have or only have a few credit cards might not have a high credit score.  Therefore, instead of simply looking at the credit score, look at all the other items in the report such as past due accounts, bankruptcy record and monetary related court record.

Now that you understand how to read and interpret all the major components in a credit report, the next thing you should do indeed is to compare the job candidate with your own norm.  For instance, an organization might always hire from a talent pool that has a lot of job candidates that have bankruptcy record and monetary court record.  In this case, job candidates who have a lot of unpaid and past due accounts might not be that bad comparatively.  On the other hand, if you are hiring from a talent pool that has a lot of job candidates that have no bad debt, bankruptcy or monetary court record at all, then a job candidate with past due accounts is comparatively not so good.

Look at the report and use the information wisely and I am sure the credit history report will be a useful piece of information to assist you to hire the right person.

About the Author

Leo Ma is the COO of eeVoices Limited, a leading third-party pre-employment background check organization in Hong Kong, China and Asia Pacific.  We specializes in pre-employment screening services such as reference check, education verification, criminal record check, court record search and credit historoy check.

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