Can Your Employment Get Affected By Cibil Score


It is becoming increasingly common for companies, especially in the financial industry, to run a credit check on prospective employees as a condition of hire. A bad credit history may land you in trouble and might make it difficult for you to get the job you want. The situation can turn out to be a lot more challenging if you have a history of bankruptcy. A recent study by the Society for Human Resource Management (SHRM) showed that 60 per cent of employers pull current and potential employees' credit reports. This is done to determine how financially stable you are.

Recently, employers especially from finance and software companies have been asking prospective candidates to submit their Credit Information Report from CIBIL, at the time of their interview. Keeping this in mind, an individual should keep checking his/her report to make sure that the right information is included in the report.

Background verification, which was till recently was used by a handful of companies is slowly becoming the norm. This not only includes the standard verification of basic information like address, education and past employer, but also other parameters like creditworthiness and ideological leanings. In light of recent events in the banking sector, employers across industries are more cautious than before. They are seeking reassurance that their candidates and employees are not just talented, but trustworthy too.

Credit checks can be used to understand a candidate’s or employee’s financial position, credit activities, and repayment history, but can also underline financial stress. Explicit consent is sought from the candidate and only after that the CIBIL score and report is shared with the employer. The candidate is also provided a copy.

The intense job competition prevailing in today’s market, has resulted into candidates providing fabricated profiles and hiding or embellishing their skills or experience to appear more appealing to the recruiters.

Why Do Employers Look For In Credit Reports?

Being a good culture fit

Besides basic credentials, companies also check if the candidate will be able to fit into the culture of the particular organization. that they conduct exhaustive background verifications that include candidate data from past three employers, academic details, legal issues and reference checks with past supervisors. In case of senior candidates, we also tap our formal and informal networks to gauge their strengths and culture fitmen.

With aspiration levels rising faster than the industry’s ability to create jobs, candidates are increasingly misrepresenting information to employers, say recruiters. This tightening of the employee screening process can be seen as a reward for credit-disciplined individuals, Just like updating their resume and portfolios in preparation for a career change, candidates should continuously track their scores, monitor their credit activities and work towards better credit health and job opportunities.

Disclose as much as you can

 The checks include previous employment, education, salary and perks, skills, criminal and civil records, among others.

In case they find any discrepancies during the background checks, they give the employee a fair chance to explain and rectify. Digital and social media understanding is also becoming important. Among smaller companies, a lot of hiring is done through references thereby eliminating the need to engage external agencies for background checks.

In such cases, reference checks are a quicker, effective and efficient option. Going by what we do at Goomo, They hire a lot through references and that eliminates the need to conduct background verification for most candidates.

Risk assessment of new joinees

Each new employee brings certain risks and expertise to the system of the new organisation. it is important to have a complete background verification across roles. Apart from the checks of the address, past employers and educational qualifications, he said that court records, drug tests and social media offer the human resource teams a view of the liabilities that the candidate might bring to the organisation.

Quick fixes to save time

But the time consuming activity can also be a deterrent to some companies which are now taking the help of the internet to quicken the process. Real-time checks using data sourced from government recognised and regulated entities are also being done to cut down time. It takes close to 3-4 weeks and in some cases 6-8 weeks to get a full report by which time the organization has invested into the employee. There is a clear need to segment the employees and use rule engines to determine the need and scope for background verification. We have been able to develop models where 30-40 percent of our employees would not require background verification, thanks to Aadhaar, CIBIL scores, PAN validation which are available online

A reference check from past employees is also being preferred to save time and costs for the companies. In some cases, there is a situation of a just-in-time hiring which means that a company has very little time to fill the position. Here, extensive use of basic KYC tools and checking with past employers, bosses, alumni network is used.

Legal implications

A lot of roles are also customer-facing and would require transactions that could be sensitive, cash-heavy or both. If any company’s employee is accused of any data leak or financial irregularities, clients have the right to sue them. it becomes a responsibility of a recruiter to ensure that the employees associated with the company do not have a questionable past which can potentially harm the business, its clients or other employees.

Way ahead

Candidates can no longer fudge data on the sly without being questioned by employers. With resume farms providing fake credentials for a few thousand rupees, the problem of misrepresentation has become rampant. As more Indian companies go global, they prefer to invest a few lakhs in getting the right hires, than risk crores in reputational damage later on. The downside for employees is that no longer will their private space online will be fully private and they could be asked to justify some of their views on topics seemingly unrelated to work, during the recruitment processes.

This is the first part of a series looking at how recruitment has evolved.

So What Exactly Is A Credit Score?

 A credit score is a 3-digit number that shows you the numeric summary of your credit health. This score is obtained by Credit Bureaus, by analyzing your credit history. It is one of the determining factors for the approval of a loan or credit card application. This score is affected by a range of factors such as payment and borrowing patterns, the number of credit card or loan applications, credit utilization and more.

The score usually ranges from 300 to 900 points and higher scores suggest more chances of getting approval on your loans. Scores that fall above 700 usually is an indicator of good credit management. Thus, needless to say, the higher your number, the better you look to lenders and now employers alike.

Why Obtaining A Credit Report Is Important

Obtaining a credit report is equally as important the credit score. It includes a person's credit history with detailed information of their credit accounts and loans, bankruptcies, and late payments, apart from their personal information.
It is issued by licensed Credit Information Companies.

Credit Scores Are Checked As Part Of Background Verification

Employers across different sectors generally check credit scores or peruse credit reports as part of the background verification procedure before hiring potential candidates.

It has been observed over the years that many companies have started focusing on the financial health of an individual in order to evaluate several personal attributes such as reliability and honesty.

The logic is supposed to be that bad credit scores would imply that the person is bad at managing his finances which is bound to impact his performance at work.

3 Ways Credit Scores Are Related To Employability:

1.While there might be genuine reasons for a person's bad credit score or report, employers can perceive this as a sign of being irresponsible and incapable of taking care of things. Just as how companies and employers are wary of criminal records, an extremely bad credit report can have the same effect.

2.Additionally, employers can perceive a person with a bad credit report as dishonest and a potential threat to the workplace. While it is still debatable in other circles, from the employers' point of view, they would much rather minimize the risk. 

3.Lastly, a bad credit report is indicative of a debt trap which more often than not affects people's performance at work. Even if it might not always be the case, many employers see it as thus. 

How To Make Sure Your Credit Score Doesn't Harm Your Employability

The best way forward is ensuring that your credit history does not reveal any negative credit history. For this, there are certain things to remember that can help you keep a check on your credit history like Repayment History Information.

Repayment History Information (RHI) consists of existing and missed consumer credit payments that are included in your credit report.

In some instances, your RHI may be used by credit providers in assessing your capacity to afford a new loan or credit card. In other instances, employers may refer to your RHI in your credit report to gauge your credit history.

In addition to this, candidates must watch out for any possible error in their credit report, false information passed to CIBIL - which could reflect negatively on the report.

By habitually checking your credit report, you can ensure that your credit reports remain positive and the right career opportunities don't pass you by.

 
 

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We provide advice and information on how to best manage your current credit to maximize the impact to your qualifying ability.
 
 

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