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Credit Checks and The Video Interview: Know the Laws

In today’s competitive marketplace, employers are looking for ways to find out more about the job seekers applying for an open position. One of the tools employers are using to connect with great candidates and find out more personal information is the video interview. Another tool, and one with some tricky legal restrictions, is the credit check.

Hiring managers are using credit checks to see if potential employees are responsible when managing their own finances. A candidate with a bad credit score can be a warning sign for employers, especially if this candidate is looking to land a job dealing directly with money.

This might explain why a 2010 study by the Society of Human Resources Management found 47 percent of companies conduct credit checks on at least some of their candidates, and a further 13 percent of employers conducted these credit checks on all candidates across the board.

However, the times have changed since 2010 and new laws must be considered before you crack open a credit report. Just because a candidate impressed you in the video interview, doesn’t mean this job seeker has perfect credit. Since the recession in 2008, even some of the best and brightest have found themselves in economic hardships. This might explain why several states across the U.S. have cracked down on the wide-scale usage of credit checks.

If the candidate impressed in the video interview and you want to see if their credit score will also impress, there are some things you should know. So before you get into hot water for your credit checks, make sure you know the laws when it comes to evaluating a job seeker’s credit score.

Know your state laws

Legislation ruling on credit checks in hiring process have been turned into law in at least seven states. California is the newest state to pass legislation on using a credit score in employment background screening. It joins Hawaii, Washington, Oregon, Illinois, Maryland, and Connecticut which have similar laws in place. If your company isn’t located in one of these states, don’t think you can ignore the credit score conversation.

Pending legislation is up in a variety of states including the District of Columbia, Michigan, Georgia, Minnesota, Nebraska, New Jersey, New York, Ohio, Pennsylvania, South Carolina, Vermont, and Florida–so it’s not an isolated issue for only seven states. You should keep an eye out for how these states rule on evaluating credit scores as part of the job application and hiring process.

What’s the job?

Like a candidate would tailor a resume or an employer would tailor questions in the video interview, the evaluation of credit scores should also depend upon the position. After all, a bad credit score can sometimes have zero impact on job performance. This is why new laws protecting job seekers ask employers considering credit scores to only use this measurement if the position calls for financial responsibility.

If the candidate is working in the financial sector or working closely with your company’s money, then it makes sense to check out their credit scores. If not, perhaps there are better metrics you can use to find out if this is the right person for the job.

Credit report notification

If your position deals with financials and therefore a credit check makes sense, the new laws say you must notify the candidate that you plan to order a credit report. You must also make this notification in writing.

If the credit report is negative and you decide not to move forward with the candidate because of these scores, you need to once more notify the candidate that the credit report was the reason they weren’t hired. In addition, you must provide the name of the consumer credit report agency that performed the credit check.

A credit check can tell you important information about a candidate, especially if your top notch candidate is looking for a position in the financial sector. Sometimes, a video interview is only the tip of the iceberg, and you need to find out more about a smart candidate. This is why it’s important to make sure you stay compliant with all current laws and regulations.

Do you perform credit checks? Why? Have the new laws affected you? Share in the comments!

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Heather Huhman

Heather R. Huhman is the Career & Recruiting Advisor for Spark Hire. She writes career and recruiting advice for numerous outlets, and is the author of Lies, Damned Lies & Internships: The Truth About Getting from Classroom to Cubicle (2011), and #ENTRYLEVELtweet: Taking Your Career from Classroom to Cubicle (2010).