Employment credit checks are a tactical defense mechanism companies can use to protect themselves from things like employee theft, fraud, and turnover. It is commonly believed that credit history reflects a person's personality, to a degree. If someone has bad credit then it may mean that person can be irresponsible, especially when it comes to money.

For this reason, most investment banks include employment credit checks in their hiring process. People on "the floor" are often handling hundreds of millions of dollars. JP Morgan probably does not want to hire a trader who can't handle his or her own finances or someone who is historically irresponsible with money. A person who is intelligent with his or her own money will most likely be intelligent with the company's money.

Conducting Employment Credit Checks

Credit checks can reveal a bounty of information that may be difficult to sort through. It can be a good idea to come up with a set of criteria ahead of time to avoid becoming overwhelmed. Everyone involved in the hiring process should meet to determine what results will end in nonconsideration of an applicant, and what will simply merit a further look.

The best policy for maintaining reputation can be to let applicants know ahead of time that their credit will be checked. A further decision will be whether to let employees respond to what is found in the report or not. Sometimes there are legitimate mistakes found in candidates' credit reports due to clerical error or even identity theft. On the other hand, inviting responses by applicants may be more of a headache than it is worth. Make this decision ahead of time, even if that decision is to handle such issues on a case-by-case basis. Credit checks are an efficient way to screen applicants, and planning ahead of time only adds to the effectiveness.