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What is a credit screening?
In a recruitment process, a credit screening involves checking the financial background of a candidate or employee to ensure that they do not have any financial problems that could affect their performance at work or pose a risk to the company.
However, it is not only employers who can perform credit screenings, also referred to as credit checks. Lenders, landlords and others who need to make financial decisions about a person can also perform a credit screening to assess an individual’s ability to pay and overall financial stability.
Why is a credit screening important when recruiting?
As an employer, when recruiting for financially sensitive roles , a person’s financial history can be crucial. Certain industries are more reliant on credit screenings than others, as they involve handling large financial transactions or sensitive information.
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Here are four industries where credit checks are common:
Bankers, accountants and economists manage clients’ assets and investments. To minimise the risk of fraud or irresponsible behaviour, it can be important to ensure that they do not have financial problems that could influence their decisions.
Insurance brokers and claims handlers work with sensitive information and are responsible for large financial transactions. A stable financial background can reduce the risk of them finding themselves in situations where they could be negatively affected by their own debts.
Real estate agents and rental managers handle large contracts and property deals, often with significant financial stakes. Companies want to make sure that their employees do not have financial problems that could lead to irresponsible decisions.
Officials responsible for budgets and procurement in the public sector manage large amounts of public money. It is important that they are financially responsible.
As an employer, can I run a credit screening on a candidate?
When recruiting, employers must consider laws and regulations that protect the candidate’s privacy. A credit screening must always be relevant to the position the candidate is applying for, and the employer must inform the candidate that such a check will be carried out. This is regulated, among other things, by the GDPR and the Credit Information Act. It is important that the employer has clear guidelines on how the check is carried out and on what factors are considered in the hiring decision, to ensure that credit checks are done ethically and legally.
When used properly, a credit screening can be a valuable tool in the recruitment process, but misuse or abuse can lead to legal consequences and damage your company’s reputation.
How to run a credit screening
To carry out a credit check during recruitment, many companies work with credit reference agencies . These provide an overview of the candidate’s financial situation. However, it is important that the information collected is relevant to the position and that it is handled in accordance with applicable data protection rules.
You can also hire a background check company to manage the entire process for you, ensuring that everything is conducted legally and ethically.
What is included in a credit screening?
The credit check can show things like payment defaults, income, debts and company commitments. The data is gathered from various sources, such as courts, the Swedish Tax Agency, debt collection agencies and the Swedish Enforcement Authority. The check gives the employer a clear picture of the candidate’s financial situation. The most important thing is to look at the big picture and make an overall assessment of the candidate’s financial situation.
Validata – your partner for background checks
Validata offers a complete solution for employers who want to ensure that the right person is hired. In addition to credit checks, you as an employer can also choose to do other types of background checks, such as verification of work experience and criminal record checks. With Validata, you can tailor your recruitment process and minimise the risk of financial problems or employee irregularities.
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