What Do Employers See When They Check Your Credit Report?

10 April 2016

When Canadians apply for a new job, most expect they will be interviewed, someone will contact their references and even that they will be subject to a criminal background check. What far fewer anticipate, however, is that many employers will also check applicants’ credit reports before bringing them on board.

Although many job seekers may not realize their credit history could determine whether they are eligible for a job, the practice is relatively common. According to The Globe and Mail, citing a survey of human resources professionals in 140 countries around the world, nearly half (47 percent) of companies ran credit checks when hiring for certain positions. That figure jumps to 91 percent when companies consider a candidate for a role that deals with cash, finance or banking.

When asked why their companies chose to conduct these credit checks, most survey respondents cited an effort to avoid theft or fraud. Other reasons included reducing the company’s legal liability for negligent hiring and as a tool to measure trustworthiness.

What is on Your Credit Report?

When a consumer opens his or her first line of credit, be it a car loan, mortgage or simply a credit card, a file is opened with his or her name on it at the two credit bureaus in Canada, Equifax and TransUnion. Over time, all of the consumer’s borrowing information makes its way into the file, from payment trends to total debt to the number of cards the consumer has open.

When a potential lender wants to assess your creditworthiness, it will pull a copy of this report. By analyzing the data, it determines how responsible you are as a borrower and whether extending a loan to you would represent a risk for the company.

What Does an Employer Look For?

Similarly, when an employer requests a copy of your credit report, it can see a detailed history of your borrowing behavior. However, employers typically look for different information than lenders. Sometimes, employers will simply check your old earnings statements to confirm your previous employment and reported salaries. Other times, if they are attempting to evaluate your reliability as an employee, they may be more concerned with your payment history, checking to see if you opened new lines of credit you couldn’t pay for or how often you missed or were late with your payments.

When a candidate has applied for a position in the financial industry, employers are typically more stringent about their credit checks.

“The thinking behind pre-employment credit screening is, basically, an employer wants to know if your house is in order before they let you handle their house,” Tim Hardie, president of Hire Performance Inc., an Ontario company that provides pre-employment screening services, told the Daily Mail. “Knowing how you handle your own financial situation is especially important if your job involves handling cash or finances.”

Ensuring your Credit Report is Accurate

No matter what information a specific employer may be reviewing, it is crucial a candidate’s credit history is accurate, as a credit report marred by credit fraud or identity theft could leave victims not only short on cash, but also unable to find a job.

Signing up for a credit monitoring service like Identity Guard Canada can help. If we detect certain activity on your credit files that may indicate fraud, we will notify you so you can take proper action.