Credit checks: Reducing the risk of fraud in the workplace

credit check

Credit checks: Reducing the risk of fraud in the workplace

credit check

Recently, social media has been filled with the viral news of job applicants who did not pass the recruitment process due to their credit history. This incident has sparked various reactions among the public, leading to a growing skepticism about the importance of considering credit history as a crucial factor in evaluating potential employees.

Credit checks are far from a novel practice. Numerous institutions, notably within the realms of banking, insurance, and various financial sectors, routinely incorporate credit checks into their employment screening procedures.

In essence, a credit check entails a systematic and comprehensive review of an applicant or employee’s credit history as an integral component of the vetting process. It is important to note that, in Indonesia, credit history documentation is exclusively provided by the Financial Services Authority (OJK)

Credit history and fraud risk

Credit checking encompasses the examination of various loan types, such as online loans, mortgage loans, vehicle loans, and other financial loans that fall under the supervision of OJK. All transactions related to loans are meticulously documented within OJK’s Financial Information Service System (SLIK).

Problematic credit history includes situations where online loans have been used to the extent of approximately 70% of the available credit limit and where an active credit card is being utilized for up to 98% of the credit limit provided by the bank.

According to the “Report to the Nations” study conducted between 2018 and 2022, two primary red flags—living beyond one’s means and encountering financial hardship—have consistently ranked as the top individual indicators that companies should remain aware of, which are crucial for reducing the risk of fraud.

Benefits of a credit check in vetting process

Before proceeding with a credit check, companies must first secure written consent from the candidate and conduct the process with the utmost professionalism, emphasizing objectivity and safeguarding the confidentiality of personal data.

Conducting a credit check allows companies to acquire comprehensive insights into a candidate’s lifestyle and financial standing—this information holds significance for several facets of the subsequent evaluation.

First, credit checks enable companies to assess the degree of trustworthiness and financial management capabilities of candidates. Instances of delayed payments in a credit history could signal a lack of responsibility, challenges in financial management, or non-compliance with financial agreements.

Secondly, these checks serve to mitigate the risk of hiring candidates grappling with financial difficulties that could adversely affect the organization. A credit history laden with debt may indicate financial stress, potentially elevating the risk of dishonest or fraudulent conduct.

By drawing upon the findings from a credit check, companies can make more informed decisions during the hiring process. These decisions entail a thoughtful consideration of potential risks stemming from a candidate’s financial situation and economic behavior.

Credit checks go beyond the recruitment phase; they can also be integrated into periodic assessments for current employees (employee monitoring). This is especially relevant in the context  of promotions, particularly for roles involving decision-making in critical departments like procurement and marketing. Hence, credit checks play a crucial role in assisting companies in upholding stability and integrity throughout all levels of their structures.


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