Credit search is an umbrella term for a host of activities. The original goal of credit search is well known. Companies use credit search or credit reports for evaluating the creditworthiness of individuals and companies. Most companies look at the credit report of a consumer or a business before extending credit.
Credit Searches in Recruitment
Of late, however, credit searches have become a factor in the recruitment process. A growing number of companies are looking at the credit report of an individual before offering a job. Indeed increasing number of companies are carrying out a background check before hiring employees. A typical background check tries to ascertain if a job applicant has a criminal record or not among other things.
More often than not, a background check includes a credit search. The employer or the agency carrying out the background check uses the credit report provided by credit reference agencies such as Equifax, Experian and Transunion for finding out the credit history of the job applicant.
Credit Search Reports
When making a credit search the employer will be looking for a single credit report which includes personal information such as age, address, social security number and employment details besides public records, bank account details and collections. A credit report also includes information on previous inquiries into the credit history, disputed file information and consumer statement relating to issues such as identity theft.
The disputed file information needs further explanation. A small percentage of consumers actively monitor their credit reports for discrepancies because a clean credit report increases chances of getting attractive credit terms. So if a consumer believes a specific piece of information in his credit report is erroneous then he could voice his concerns with the credit reference agency. The details of the dispute will be shown under the 'disputed file information' category.
Legislation and Credit Searches
Clearly, the credit report has begun to play an important part in recruitment. An individual with a bankruptcy filing, for instance, may require further investigation. The governments worldwide, however, are taking steps to prevent indiscriminate use of credit reports. In the USA, for instance, companies cannot launch a credit search on their own. According to provisions of the Fair Credit Reporting Act (FCRA), companies need the permission of job applicants for looking into their credit reports.
If a job applicant does not get a job because of negative information in his credit report, then the company is obliged to show the credit report to the rejected job applicant and tell to him how to get a copy of the credit report from a credit reference agency. The credit reference agencies will levy no charge if the job applicant demands a copy of his credit report within 60 days of the job rejection letter. A recent legislative change requires the credit reference agencies to provide a free credit report to the consumer once every 12 months upon demand.
Credit search could also mean a search for best terms on financial products such as personal loans, mortgages, credit cards and auto loans. Take credit cards for instance. Most consumers use the Internet to compare credit cards on factors such as interest rate; cash back bonus on purchases; annual fee; and the rate on balance transfers from other cards. Clearly, there is more to credit search than credit reports alone.