How well do you think credit checks meet the effectiveness criteria of
- reliability;
- validity;
- ability to generalize results;
- high utility ;
- legality?
At some point, it can be argued that credit checks are reliable. But one has to follow up this one with another question: reliable about what? One has to clarify what type of information is revealed with the use of credit checks. In this regard, it can be said that it is reliable only when it comes to the information concerning the person’s inability to pay his bills. But this does not automatically mean that the applicant does not have self-control, uneducated, has a low I.Q., or emotionally unstable to work in an office environment. There can be many reasons why a person has racked up a significant amount of debt but it does not automatically say that this person should not be hired by the company.
The same thing can be said about the validity of the information gleaned from such activity as well as its ability to make an accurate generalization of the person’s character and true potential. It is not valid when making assumptions about the overall capability of the applicant. There are other reasons beyond the control of the applicant that could have lead to fact that he or she has a low credit score and failed when it comes to a credit check.
It is important to understand that the HR manager cannot make generalizations using information from the credit check and extend it to other aspects of the person especially when it comes to skills, teamwork, and the ability to get things done. At some point, it would become a discriminatory act. It becomes a major stumbling block for a person to get ahead in life. It becomes an unfair standard that a person cannot hurdle because it is beyond his control. One can argue that a mistake has been made but the applicant must be given a second chance or else there is no other way to break free from the cycle of poverty.
It becomes discriminatory like judging a person because of the color of his skin. Discrimination occurs because of assumptions and generalizations. It is making decisions based on a set of facts and then making conclusions beyond what the data suggests. For instance, a person can be discriminated against because of her gender. The generalization is that a woman will marry someday and bear children and in the process would miss work.
The firm would then have to hire somebody else to take her place and in the process incur additional expenses. This is discrimination. The same thing can be said when a person is discriminated against because of his or her skin color. It can be argued that the applicant, in this case, may have come to this situation because of events beyond his or her control, and therefore it is discriminatory to prevent the applicant from getting work because of the inability to pay bills.
However, it must be made clear that it has value and utility because it can immediately provide a significant view of the person’s personal life. This brings the discussion to the next question which is the legality of the process. It can be said that credit checks are legal as long as employers and interviewers follow strict guidelines regarding candidates’ privacy rights. This may not be an easy thing to do. A company may find it difficult to adhere to strict guidelines. It is a challenge to force companies to follow these guidelines because they had no obligation to hire the applicant. They can easily say that the application is rejected without giving any type of explanation whatsoever.
For what kinds of jobs might a credit check be a useful selection method? For what kinds of jobs would it be unhelpful, inappropriate, or unethical?
A collection agent, a job at the tax revenue bureau, a cashier, and jobs related to banking and finance. The answer to this question is dependent on the premise that the hiring firm has the capability to correctly interpret the background and credit checks utilized by the company as a pre-hiring tool. If this is the case then a person with a low credit score or someone that is tens of thousands of dollars in debt must not work in an organization or a department where he or she has access to a great deal of money. In addition, these persons must not work in a job wherein they can be tempted with a bribe.
However, the same pre-hiring tool is ineffective and irrelevant when it comes to jobs that require specialized skills like nursing, graphics artists, technicians, teachers, musicians, computer programmers, software engineers, architects, etc. This simply means that a person that is struggling with credit card debt does not mean that he or she is no longer talented or had forgotten the specialized skills that were mastered after years of training and hard work. Thus, it becomes discriminatory not to hire a competent person simply because of his or her credit history.
Imagine that you are an HR manager of a company operating in a state where credit checks of job applicants have been banned. What other selection methods could you use to pick honest and responsible employees?
The HR manager must hand out a well-designed application form that can help provide an accurate description of the applicant’s educational and personal background. And more importantly, it would reveal the applicant’s work experience. The HR manager must invest in a system that can help generate an effective interview questionnaire. This could mean hiring a consultant or simply putting up extra work to develop a questionnaire that can totally reveal the person’s strengths and weaknesses as well as capabilities.
The HR manager can also utilize reference checks to know more about the applicants. It has also been said that the use of the Internet is also an efficient tool. The Internet can be used to find out if the applicant has a criminal record. Aside from the background checks and interviews another way to determine if the person is the right fit for the company, the HR manager can develop tests to determine the skills and other capabilities of the applicants.
It requires a great effort to develop questions for the interview. The HR manager cannot simply take questions from a book or download a questionnaire from the Internet. Aside from going through the resume and other documents submitted by the applicant days before the interview begins it is also important to develop the skill to make follow-up questions. This would be a challenge especially when the applicant is in front of the interviewer. But this is an important skill because it has the capability to draw out more pertinent information from the applicant.