What's the point of performing a credit check on consultants?

Many consultants vying for contracts have had their credit history investigated by hiring companies. Is this a valuable HR standard, or is it irrelevant? Read what some consultants are saying about this step in the interview process.

If you’re an IT consultant who repeatedly endures contract interviews, you’ve probably endured a lot of reference checks.

In a discussion sparked by Timothy Huckabee’s recent article “What do personal references really mean?” TechRepublic members commented on one particular aspect of reference checking: the credit-history checks that many companies conduct when considering a candidate for a consulting project. Many consultants may not know that a poor personal credit history could come back to haunt them. While some doubt the need for or the value of these checks, other members—based on their experience—even feel that they can be dangerous and could paint the wrong picture of a candidate or employee. Read what your peers had to say.

How does credit history relate to ability?
The question on many consultants’ minds is how their personal finances relate to their ability to perform well on a project.

Member dawuf fails to see the correlation unless the consultant is being granted a high-level clearance of some kind: “I don’t think how well one manages their credit has anything to do with how well they do their job.”

But many companies looking to hire consultants seem to feel that there is some relationship between personal money management and job performance. Don Tuleja, owner of Sharkbyte Web Designs, was recently hired by such a company: “[I] had to sign a statement that I would keep my financial affairs ‘in good order’ so as not to bring risk or embarrassment to [my company]. I find it hilarious. Heaven forbid a huge corporation gets red-faced because I missed a truck payment.”

Employers’ rationales
Although consultants are often short-term hires, many organizations will hold them to the same standards as full-time personnel. And if the company is a financial organization, applicants should count on having their numbers run.

Consultant Ed Gooding claims that one of his financial-institution clients won’t hire a consultant who has a history of defaulting on debt payments. If an employee that’s already on board slips up on a payment, it’s unlikely that the company would fire them. “But if there were other misses, they would most likely terminate [that person],” he says.

The rationale of this company, according to Gooding, is that if an employee that has access to the company’s financial data has credit problems, that employee may be more inclined to “modify” the company’s financial data.

Telling the whole story
A marred credit history, however, doesn’t necessarily mean that a candidate is inclined to do something irresponsible or illegal. Member feymary believes that if applicants are going to be turned away based on their credit histories, the applicants should be given ample opportunity to explain themselves first.

“How do you know that they didn’t have legitimate reasons for being behind for a period (e.g., medical expenses, a new baby, or their house burned down and they had to replace the basics, etc.)?”

Moreover, feymary knows firsthand that credit reports are sometimes wrong. When feymary worked in the credit-card division of a bank, she mistakenly let a large number of accounts be processed under the code “Z”—a label deeming the cardholder deceased. Many accounts were cancelled because of the error, and the cardholders were forced to prove that they were alive and well.

Kicking them when they’re down
If someone has had some proven financial trouble in the past, how can that person ever fix the problem if he or she is repeatedly turned away from jobs? This is another question on member dawuf’s mind.

“Making this a widespread practice for hiring is the equivalent of putting your boot on the back of an individual who is already down.”
Have you been subjected to credit-history checks when applying for jobs? Do you think it’s useful for an employer to know this information? Join the discussion and share your experience and opinion.

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