Credit Background Check in India: How is it Conducted and its Benefits for Employers

Credit Background Check in India: How is it Conducted and its Benefits for Employers


An employee credit check is when an employer obtains a copy of an applicant’s or current employee’s financial records in order to have a better understanding of their financial history.

What does this mean for an employer or a company as a whole? Credit checks for employment are an important part of the onboarding process because they reveal how economically responsible a person is, which reflects the attitude they will have toward company finances. Any type of corporate obligation is well-known to be associated with financial responsibility.

Regardless of an employee’s position, the firm must be able to trust them with money, which is made possible by a thorough credit history check. This is a guarantee to the company that its personnel will not engage in any financial mismanagement, such as fraud or other criminal activity, which would result in a significant loss. According to the findings of a survey performed by the Society of Human Resource Management (SHRM), up to 60% of all companies run a credit check on their potential employees.

Credit background checks are required for executive-level employment in industries and firms where personnel must manage large quantities of financial transactions, such as accounting and banking. This is due to the fact that there is a significantly greater risk of financial fraud in these areas.

How is a Credit Check done by organizations in India?

Your credit reports are normally accessed by potential employers to assist them in deciding whether or not to grant you a job. Credit reports may also be checked for insurance purposes or when applying for services like phone, utilities, or a mobile phone contract.

Equifax, Experian, and TransUnion are the three credit bureaus that provide credit reports nationally. Some lenders and creditors may not report to all three, so your credit reports from each may differ. Some people may only report to two people, one person, or none at all.

Notification and Authorization: If your company intends to check your credit background, it must inform the applicant and obtain their written permission. The notice must be “clear and conspicuous” and not jumbled with other languages.

Once permission has been procured by the employer, the necessary documents or records are sent to the credit bureau for verification and retrieval of the applicant’s credit report or credit history.

What Is Reported in Credit Checks for Employment?

Employment credit checks reveal a person’s credit-to-debt ratio and previous bankruptcies, revealing how they’ve handled credit and bill payments in the past—a significant signal for jobs where the employee will be handling or managing money. While credit checks for employment do not reveal credit scores, the following information may be revealed:

  • Current and past employers’ names and addresses.
  • Bankruptcies that have been announced.
  • Any outstanding bills turned over to a collection agency. 
  • A record of the individual’s credit and payment history.
  • Other inquiries into the candidate’s credit history.

Employment background checks provide you with a complete picture of a candidate’s credit history, but they don’t reveal account information or information that is forbidden by law. For example, if a candidate filed for bankruptcy more than ten years ago, it will not appear on their credit record. The following items are not included in credit checks:

  • Account numbers and other account identifying information.
  • Information on your credit report that is more than seven years old.
  • Bankruptcies that are more than ten years old.


Benefits of conducting a Credit Check on job applicants

The advantages of conducting credit background checks on job seekers are focused on protecting businesses from financial mismanagement. According to TransUnion, one study indicated that a job applicant with a blemished financial past was nearly twice as likely to commit theft as a candidate with no financial concerns.

More employers are doing credit background checks on applicants for some positions as a result of increased incidences of employee theft and fiduciary difficulties. Credit reports contain financial information that can reveal a candidate’s level of responsibility.

For middle or senior management roles in general, many organizations will use employment background credit checks. You might be wondering what they look at when they do a credit check on an employee. Employers can use employee credit checks to learn about a candidate’s sense of financial responsibility (for example, if they’re in charge of a department budget) and personal stability.

A candidate’s credit history, for example, may indicate that he or she lacks responsibility by failing to satisfy previous financial responsibilities.

To defend against internal fraud and theft, several organizations undertake background checks that include employee credit checks. Someone who is drowning in debt or facing an unmanageable mortgage payment, for example, may succumb to illegal temptations.

A risk assessment may be used by an employer to gauge a candidate’s probable inclination to commit fraud depending on their financial situation. When analyzing risk to the company, this information could be utilized to distinguish between two individuals with identical qualifications.

Credit checks are conducted by employers for two main reasons: Security and Accountability.

Security: Credit reports aid in the verification of an individual’s identification and background, both of which are critical components of a background check.

Accountability: A clean credit report suggests that you are financially responsible. Employers need candidates who can be trusted to carry out their responsibilities.

Employers seeking applicants with this trait may value a credit history that demonstrates overall personal financial responsibility.

Performing Credit Checks: Best Practices

There are a few crucial steps you can take to get the most out of credit checks. To make credit checks an effective element of your pre-employment screening process, take the following steps:

1) Develop an all-encompassing policy.

Your background screening policy should specify which job categories are subject to credit checks and how the results of such checks may affect a candidate’s employment eligibility. After you’ve created a policy, double-check that your current background screening procedures are in line with it.

2) Carefully examine the results of your credit check.

The results of a credit check should be viewed in conjunction with the results of other background checks, such as criminal and job histories. Certain credit check findings may not automatically disqualify a candidate for employment, especially if there are only a few isolated difficulties or they occurred many years ago. Credit reports can also contain mistakes from time to time.

3) Enlist the help of a trustworthy background screening company.

Credit background checks can be successfully integrated into your overall screening procedure with the support of your background screening partner. Because rules governing how and when your firm can do employment credit checks change often, your screening partner can also assist you in staying in compliance. Your background screening supplier can keep you informed so that you can make any necessary changes to your screening programme.


One of the many tools available to assist you to manage to recruit risk and protect your staff and customers is an employment credit check. You exhibit a strong commitment to recruiting people who can be trusted with your company’s finances by conducting credit checks. You can make credit checks an integral part of your screening process and obtain access to the information you need to make well-informed hiring decisions by setting a clear policy and collaborating with a compliance-minded background screening provider.



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