Here is our guide to credit checks and adverse financial history.
From the fundamentals of credit assessments to the ins and outs of adverse financial checks, this guide is your go-to for making informed decisions when hiring staff that require background checks to cover their financial background.
What is a Credit check?
A credit check, also known as a credit search or adverse financial check, is when a company looks at information from your credit history to understand your financial behaviour and background. They don’t always need your consent to do this, but they must have a legitimate reason.
A credit report is a detailed record of your credit history. It includes information about your credit accounts and past payments, among other things. Lenders use this report to assess your creditworthiness for things like new credit cards, loans or mortgages. Doing a credit check is an important step towards understanding your credit history.
A soft search is recorded when you request a quotation from a lender to find out what credit amount and rate might be available before making a credit application.
A soft credit check is an initial look at certain information on your credit report. Companies perform soft searches to decide how successful your application would be without conducting a full examination of your credit history. Only you can see them on your report, and it doesn’t matter how many there are.
A hard credit check happens when a company makes a complete search of your credit report. Each hard check is recorded on your report, so any company searching it will be able to see that you’ve applied for credit.
Who sets the rules?
The three main consumer CRAs in the UK are Equifax, Experian and TransUnion. Most of the information held by the CRAs relates to how you have maintained your credit and service/utility accounts. It also includes details of your previous addresses and information from public sources such as the electoral roll, public records including county court judgments, and bankruptcy and insolvency data.
CRAs operating in the UK are regulated by the FCA under the retained EU law version of the CRA Regulation (UK CRA Regulation).
How to conduct a credit check?
Credit checks are really simple to complete with EBC Global products they take less than a minute to apply for. We use the data already provided by the candidate to complete the form.
To carry out the check, we need full name details (for the last 6 years), DOB, address history (for the last 6 years), consent of the applicant and a reason for the search.
The traditional method of applying for a credit check.
The conventional approach involves going to one of the three credit agencies, signing up for an account, and entering the applicant’s personal details. This includes their full name, address, date of birth, and social security number.
After submitting this information securely, the credit agency reviews the applicant’s credit history and produces a detailed credit report. This has been the standard process for assessing an individual’s creditworthiness and financial status.
How does it work? / What documents does a candidate need?
No need for complicated paperwork — this process simply requires the input of personal information and a valid reason for requesting the check, along with the candidate’s explicit consent.
The lack of document requirements streamlines the application process, making it more accessible and convenient. The personal data requested typically includes details such as the candidate’s full name, address, and date of birth.
This uncomplicated approach, coupled with both a valid reason and the candidate’s agreement, ensures a straightforward and efficient credit check application process.
How long it takes to apply for?
Applying for a credit check via EBC Global or alternative methods varies significantly in terms of speed and efficiency.
Via EBC Global:
Time to apply Under 10 seconds.
Process: EBC Global products have streamlined the application process. The application is swift and virtually instantaneous with data and candidate consent already captured.
Result: Under 5 minutes in most cases
Via Alternatives (Direct to a Credit Agency):
Time: 10-15 minutes.
Process: Applying directly to a credit agency involves a more extended timeframe. The process includes setting up an account, entering personal data, and obtaining candidate consent. This traditional method generally takes between 10 to 15 minutes.
Result: Varies
How long do results take via EBC Global?
With EBC Global technology, check results are not just accurate; they’re also remarkably swift, often returning in under a minute. The speed is attributed to seamless integration of automated processes, leveraging pre-captured candidate data, real-time access, and optimised algorithms.
Our advanced systems eliminate the need for time-consuming manual steps, ensuring that the verification process is not only efficient but also incredibly responsive. This accelerated turnaround empowers our clients with rapid, reliable results for informed decision-making, setting EBC Global apart in delivering cutting-edge solutions in record time.
The Credit Report that comes back
The report we receive back from our provider is a detailed snapshot of any adverse financial history from the previous 6 years and does not include a credit score.
The first box contains an overview of checks and results and uses a red/green traffic light indicator for quick reference. There is then a summary of what was processed on credit checks, previous searches conducted, and several other checks that can be viewed below.
To view the full report, click here: /wp-content/uploads/2024/01/CreditCheck.pdf
What checks are carried out on the Credit report?
The checks carried out include:
- Electoral Roll search
- Bankruptcy, Voluntary Arrangements, and Insolvency Information
- CCJs
- Disputes
- Notice of Corrections
- Aliases
- Undeclared Addresses
- Number of Previous Searches
The check only checks for adverse history and does not disclose your credit score or credit account information.
Who can/needs to complete the check?
It’s a mandatory requirement if you work in finance (governed by the FCA) or if you are employed in roles that require BS7858 vetting Companies may ask for consent to run a credit check on you before offering you employment – especially if the role you’re applying for involves dealing with money. In some industries such as law, it is mandatory.
Anyone over the age of 18 can be asked for permission to run a check.
Main benefits of EBC Pro
EBC Global provide the following when getting Credit Checks on staff
- Fast Application Process – apply in under 10 seconds.
- Notifications and tracking page (record of all credit checks and activity)
- Fast to Instant Results and Notifications.
- Detailed PDF reports provide a comprehensive overview of candidate backgrounds.
- Automated Workflow: automatically uploading reports into Employment Check Pro or returning them via API, ensuring a seamless and connected workflow.
Compliance and Legal
The check is a snapshot of data from the last 6 years and holds no specified expiration date, and the details presented accurately reflect the information at the time of the check. The check should not leave a footprint on the applicant’s credit file.
Should a Credit Report reveal cautions or convictions, the decision to employ the candidate rests with the employer, unless disqualifying offences for the job role or sector are present.
Legal requirements / Fines
It’s becoming increasingly common for employers to perform pre-employment credit checks, even if they’re not legally required to. Some types of financial companies, such as solicitors, have a legal requirement to conduct pre-employment credit checks, but most other businesses have no such legal obligation.
FCA Screening is a set of pre-employment screening standards which are set by FCA to ascertain that a person is honest, has integrity and reputation and confirms that they are ‘fit and proper’ for the role they are going to undertake. The pre-employment checks consist of a variety of background checks which have been set out by the Financial Conduct Authority (FCA).
As per the Financial Services and Markets Act (2000), the firms that are regulated by FCA should adhere to a strict code of recruitment procedure and practice.
What causes delays?
Delays in the verification process may occur if the report struggles to confirm the candidate’s address or validate their name and address. However, when the candidate provides accurate and verifiable data, there are usually no significant delays.
The key factor influencing the efficiency of the check is the correctness and completeness of the information provided by the candidate.
EBC accreditations
EBC Global is proudly accredited, showcasing our dedication to top-notch credit services. Unlike brokers, we’re approved partners with leading credit data providers.
This accreditation means we have a direct and trusted relationship with industry leaders, ensuring our clients get reliable and up-to-date credit information. It’s a mark of our commitment to providing trustworthy services in the credit industry.
FAQ’s
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Can credit checks affect your score?
No, employment credit checks, also known as employment inquiries or employment background checks, typically do not affect your credit score. Only hard inquiries have the potential to affect your credit score, and their impact is usually minimal and temporary.
These checks are considered soft inquiries, which means they are not initiated by a potential lender assessing your creditworthiness for a loan or credit card. Instead, they are conducted by employers as part of the hiring process to verify your employment history, past addresses, and other relevant information.
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What credit checks do employers do?
Employers may perform two main types of credit checks during the hiring process: soft inquiries for identity verification and financial responsibility assessment, and hard inquiries for more detailed credit history, including debts and payment records.
Not all employers conduct credit checks, and the impact on credit scores varies. Candidates should be aware of their rights and give consent before any credit check is conducted.
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Can an employer refuse to employ someone based on a poor result?
In the UK, employers are allowed to consider an individual’s credit history as part of the hiring process, but they must adhere to strict regulations and guidelines to ensure fair and non-discriminatory practices. While a poor credit result may be taken into account, employers are not permitted to make hiring decisions solely based on credit information.
If an employer decides not to hire someone based on a poor credit result, they are required to provide the candidate with information about the decision, including the specific factors considered, and inform them of their right to challenge the decision. Both employers and candidates need to be aware of and comply with the relevant data protection regulations and employment laws.
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Which credit report is most accurate?
The accuracy of credit reports is generally high across major bureaus like Equifax, Experian, and TransUnion.
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Why do employers perform credit checks?
Employers must have a legitimate and justifiable reason for assessing credit history, and this reason should be directly related to the requirements of the job.
Employers conduct credit checks to assess financial responsibility, integrity, and trustworthiness, especially in roles with financial responsibilities or access to sensitive information.
Credit checks can also verify identity and information accuracy as part of a broader background check. Compliance with relevant laws is crucial, and candidates should be aware of their rights regarding employment-related credit checks.
Additional Resources