As entrepreneurs or individuals, you must be familiar with the term ‘credit score’ while dealing with lenders. Be it a loan for expanding your business or acquiring a home, credit scores decide whether or not you can secure the loan. In simple terms, your credit score is a three-digit number, usually ranging from 300 to 900 that allows lenders to assess your credibility. The Credit Information Bureau India Limited (CIBIL) scores are most commonly used in India to check the credit rating of a person. A score higher than 750 is considered good.
General knowledge is that credit scores are restricted to the lending business. But, this is changing. So, if you are planning to play with your credit history to get a job, think twice. Recent updates say that employers are planning to include credit scores in background checks. But wait, isn’t credit history already being checked by screening firms and employers? Doesn’t this also include a credit score check? Well, the current procedure of background screening does include verifying credit history but not a credit score check. So, what is the difference between both?
Understanding Credit Score, Credit Report, and their relation to Background Screening
At SecUR, we often come across candidates who consider a credit score and credit report as the same thing. As mentioned above, your credit score is only a three-digit number that helps lenders analyse your repaying capacity. Credit reports provide detailed information about your past and present credit accounts, including ones with a good as well as bad standing. While such information is helpful for lenders, the report used for employment verification differs. It may or may not include your credit account information. The credit report screened by employers and background verification firms like SecUR includes details of previous employment, legal history, and insurance. This Business Insider article clarifies doubts on what an employer screens as part of the credit check. Such information helps employers to make an informed decision. Currently, the procedure includes scanning the credit history only. Soon the background screening process will also include credit scores. So, who will benefit from this change and how? Also, will the inclusion of the score affect employment prospects? Let’s have a look.
Credit Score Check In Background Screening
A recent article in the Times of India reported that employers will add credit score to the background screening process. As per the news piece, CIBIL had been getting multiple requests from banks and background screening firms to add a financial credit test to the current procedure. Generally, employee credit checks are highly common in banks and financial institutions who deal with people’s money. Furthermore, such checks are done on employees whose role demand handling clients or dealing with sensitive information. As per last year’s livemint article, SBI asked applicants for the post of junior associates (sales and customer support) and junior agricultural associates in clerical cadre to check their CIBIL credit scores before applying. According to the report, SBI clearly said ‘candidates with a record of default in repayment of loans/credit card dues and/or against whose name adverse report of CIBIL or other external agencies are available are not eligible to apply for the post’.
How employers will benefit from the change can only be predicted. In the TOI article, Hrushi Mehta, VP and Head – Consumer Interactive at TransUnion CIBIL quoted ‘a chronically credit impaired individual may be more vulnerable to indulge in corporate misappropriation than an individual who is financially disciplined and always pays their debts on time’. When employment crimes are on a rise, this step can help strengthen internal regulations within banks, financial institutions, and other corporates. The same article also mentions that the procedure of providing credit histories to lenders is highly regulated at CIBIL. It is only sent after the customer authenticates it and gives his consent. This might also be the case when it comes to providing reports to screening firms and employers. Candidates also worry about the effect of this change on employment prospects. They fear that background screening would affect their credit scores and also the new change would cut off employment opportunities. Credit scores will only be screened and not influenced. Moreover, not every single bad credit or minor glitch will act against you. But, if you have a list of bad credit history and no improvements are seen, then you can get rejected. As a candidate, it is best to keep a track of your credit score and take steps to maintain it or make it better if it is not.
Apart from banks and financial institutions, what other sectors adopt this change and how beneficial it proves is yet to be seen. The procedure of background checks in India is being revamped for the good. With the government taking initiatives like linking Aadhaar to education and bank accounts, and the inclusion of credit score check is making the screening process highly accurate. At SecUR, we have always welcomed innovations. Our digitized internal processes combined with such changes enable us to serve our clients with timely and reliable screening reports.