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Credit checks
Navigating the laws and regulations around credit checks when hiring is not always easy. As an employer, you also have a responsibility to protect the privacy of your (potential) employees. At the same time, it is necessary to background check the suitability of employees for the position.
This article will explore the following topics:
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What is a credit check?
A credit check is a compilation of information about a person’s financial history and current financial status. It provides an overall picture of a person’s creditworthiness, i.e. their ability and likelihood to repay their debts and bills on time.
Credit checks are often used by lenders, landlords, employers and other stakeholders to assess risks before entering into financial agreements and employment contracts.
To do a background check when recruiting should be part of your company’s risk management, especially for senior roles that includes financial responsibility. With a credit check on income and financial history, you can build a picture of who you’re hiring and feel confident about handing over your company’s financial responsibilities to your new hire.
Contact us if you have any questions about credit checks and or other background checks. We will help you as soon as possible.
How a credit check can help you make the right hiring decision?
Understanding a potential employee’s financial background can provide insights that may otherwise be difficult to discover. A background check on income and payment records can show a person’s sense of responsibility, ability to make decisions and whether there is a potential risk to the company in hiring them.
Can employer conduct a credit check on an employee?
The short answer is yes, but it comes with some restrictions. The relevance of the credit check must be clearly related to the nature of the job. For example, a credit check is more relevant for a financial manager position compared to a shop assistant position that has nothing to do with finance.
As an employer, it is important to be aware of your obligations and rights regarding credit checks to ensure that the process is done ethically and legally. When used properly, credit reports can be a valuable tool in the recruitment process, but abuse or misuse can lead to legal consequences and damage your company’s reputation. It is therefore important that you familiarise yourself with the basics of background checks and what they entail.
What does the Credit Information Act say?
According to the Credit Information Act, employers may only request a credit report if it is relevant to the position the potential candidate is applying for, and the applicant must be informed that a credit report will be requested. Read more about Credit information act on Riksdagen.se.
All information obtained through the credit check must be handled confidentially and in accordance with the General Data Protection Regulation (GDPR) and other relevant laws. Information from the credit check can only be used for the purpose for which it was requested. It may even be illegal to use this information for other purposes.
Are you hiring a new financial manager? Then you may need to do a credit check
A financial manager has a high level of financial responsibility and as an employer it is important to be able to have full confidence in your staff. A credit check allows you to make a financial risk assessment and ensure that someone who will be working with your company’s finances and transactions is reliable and responsible. A person who has managed their own finances well will most likely have the analytical skills and judgment to manage the company’s finances effectively.
Want to learn more about background checks or start employment screening right away?
Credit check is a necessity in these occupations and positions
Several professions have introduced credit checks as part of their recruitment process. Here are some areas and roles where there is usually a legitimate interest in performing a credit check:
1. Economics and finance
Unsurprisingly, those who deal with money directly – such as financial managers, accountants, bankers and financial advisers – may need a credit check. Most companies want to make sure that those handling the company’s or customers’ money are financially responsible.
2. Selling financial products
Those selling insurance, loans, investment products and other financial services may need to prove their own financial stability.
3. Management positions
Senior managers and executives, especially in larger organizations, may be subject to credit checks because their personal financial decisions can be seen as an indicator of their ability to make decisions within the company.
4. Security
Some security positions, such as security guards or those handling confidential information, may need to undergo a credit check to ensure they are not receptive to bribery or extortion.
5. Legal
Lawyers and other legal professionals can sometimes be subject to credit checks, especially if they handle client funds.
6. Public services
Some public officials, especially those in senior positions or those handling public funds, may also be subject to credit checks.
What information in the credit report is relevant for you to assess?
A credit report contains several different elements, some of which may be more relevant than others for different roles. Information is gathered from courts, the Swedish Tax Agency, debt collection agencies and Kronofogden, among others.
The most important thing is to look at the whole picture and make an overall assessment of the person’s financial stability. Here are examples of some of the elements included in a financial background check:
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Record of non-payment
This reveals whether the applicant has a history of difficulties in meeting their financial obligations, which can be an indicator of poor financial planning. Payment defaults may have occurred due to unpaid debts or bills. In Sweden, the remarks usually remain on the credit report for three years, even if the debt is paid off.
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Income data
Income data gives a picture of the person’s past work roles and finances, but it should not be the only factor in an assessment. Regular and reliable income can indicate financial stability, which in turn can signal responsibility and trustworthiness. You can also see if the person receives income from other sources that are competing activities.
Tip: To see the candidate’s previous salaries, you can also ask for the last three payslips. This can help you, for example, to determine the candidate’s salary expectations and give you an overall picture of their earned income.
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Corporate involvement
If the candidate is or has been a co-owner, board member, CEO or has any other form of involvement in a company, it will be shown here. Knowing whether a potential employee has involvement in other companies can help identify any potential conflicts of interest.
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Property information
See details of real estate that the person owns or has previously owned, including the purchase price and any mortgage. Property information in a credit report can provide insight into an individual’s financial situation. Owning a property often means a responsibility for paying property taxes, insurance and maintenance. If these payments are made on time, it may indicate that the person is taking responsibility for their finances.
Want to know more about the candidate? At Validata, we perform several different types of background checks to give you an overall picture of who you are hiring.
Validata helps you with both national and international credit checks
The most important thing to remember as an employer when making a credit check on a private person is that everything must be done correctly. A credit check needs to be done in accordance with several laws and regulations to protect the candidate’s personal integrity.
At Validata, we are experts in background checks and credit checks and ensure that everything is done safely and securely. We help you with both national and international credit checks and can quickly verify relevant information with our trusted partners. Our verification process is fast and efficient and everything is done in accordance with applicable laws and regulations such as GDPR.
If you have any questions about how our credit check works, you are welcome to contact us!
If you have any questions about how our credit check works, you are welcome to contact us below! Or call us on +46 8 25 26 00
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