Credit Checks and Employment in the UK

A pre-employment screening credit check is one of ten background checks employers use in the UK. Employers use credit checks to understand the financial situation of their candidate and mitigate any employment risks.

Due to its ability to help prevent fraud, pre-employment credit checks are becoming more common in the UK.

In this article, we discuss what a credit check is within the context of hiring and pre-employment screening/background checks.

What is a pre-employment credit check?

A pre-employment credit check is a type of background check employers use to assess the financial situation of a candidate. Typically, organisations in the financial sector use credit checks to mitigate any risks such as fraud. However, other sectors have also been known to use this check, particularly for roles where the individual will be handling monies and/or financial data.

What appears on a credit check?

A typical pre-employment credit check examines public and private databases for County Court Judgements (CCJs), bankruptcies, voluntary arrangements, decrees, and administration orders.

A credit check will generate a report, which will show:

  • The candidate’s registration details (full name, date of birth, address)
  • What debts (if any) the candidate has and how much is owed
  • If regular payments are made on time
  • Bankruptcies and insolvencies
  • If a CCJ has been filed against the candidate in the last 6 years
  • If credit has been applied for recently

Why do employers need to run credit checks?

For employers, a credit check performs two functions.

Firstly, it acts as a fraud prevention measure. Many employers contend that a candidate revealed to have bad credit may be more likely to commit fraud in the future. However, this does assume that a candidate with good credit is unlikely to commit fraud, which simply is not true. Therefore, employers will often couple a credit check with a DBS (criminal record) check to get a fuller picture of the candidate.

Secondly, it allows organisations in the financial sector to assess the quality of a candidate. For example, if a company are looking for a financial advisor and the candidate has bad credit, this may indicate a lack of suitability for the role.

Can an offer of employment be withdrawn from a candidate with bad credit?

A pre-employment credit check’s primary function is not to provide information to qualify or disqualify a candidate. The primary aim of the check is to understand what risks may be involved if the candidate is onboarded as an employee.

That said, a bad credit rating may disqualify a candidate if:

  • It affects their ability or suitability to perform the role
  • The organisation/employer are mandated by UK laws (meaning the employer cannot hire someone with a bad credit rating)

In most circumstances, an employer will note the current state of the economy and its potential effect on a candidate’s credit rating (e.g., the COVID-19 pandemic).

What can EBC Global do to help?

EBC Global offer pre-employment/background screening software solutions that can help organisations manage credit checks, as well as criminal record checks, right to work, referencing, and more.

EBC Global provide background check solutions for all sectors and candidates across the world.

Not only do our systems help organisations maintain compliance, they also help reduce the time associated with the hiring process by approximately 70%.

To learn more, visit https://ebcglobal.co.uk/pre-employment-screening-software-apps/