In June 2022, a 26-year-old commerce graduate, sought a probationary officer position at a prominent public sector bank. Unfortunately, his application faced rejection due to a deficient credit score resulting from defaults in credit card repayments. His’s experience mirrors that of numerous individuals encountering similar rejections. The Institute of Banking Personnel Selection (IBPS), an organization facilitating banks in their recruitment procedures, has implemented a minimum credit score criterion of 650 for candidates aspiring to secure roles in clerical and probationary officer positions within banks. Banks, dealing with sensitive financial information, demand employees with a proven track record of responsible financial behavior.
In addition to domestic banks, certain multinational corporations like Citibank, Deutsche Bank, and T-Systems conduct a review of an applicant’s credit history as part of the background verification process. A favorable credit score is regarded as an indication of reliability and trustworthiness.
In contemporary times, banks are emphasizing the significance of a favorable credit score in their recruitment announcements. For example, in March 2022, the State Bank of India (SBI) released an advertisement for probationary officers. As per the advertisement, candidates with defaults in loan repayments to banks or non-banking financial companies (NBFCs), encompassing credit card dues, and who haven’t cleared their outstanding amounts until the issuance of the appointment letter, will be deemed ineligible for the position. The advertisement also specified that candidates who settled their outstanding dues by the appointment letter date, yet possess a credit report not reflecting the update, must either ensure the report’s timely update or provide a no objection certificate (NOC) from the lender confirming the absence of outstanding dues; failure to do so would result in the withdrawal of the offer letter.
Examining credit reports is a standard practice in the employment procedures of the banking, financial services, and insurance (BFSI) sector. In fact, this practice is anticipated to become widespread in various other sectors in near future.
Employers place greater emphasis on reviewing an applicant’s credit history rather than just their credit score for various reasons. Examining an individual’s credit history provides valuable insights into their financial responsibility. Additionally, it serves as a crucial tool for assessing the financial distress of an individual, determining the potential risk of theft or fraud within the organization. In sectors where financial responsibility holds significant importance, such as financial services, employers may leverage credit bureaus to scrutinize an applicant’s credit profile, gaining a comprehensive understanding of their financial situation. Individuals lacking financial responsibility may not be well-suited for roles involving the management of company finances or customer funds.
Employers now consider credit scores as a means to assess candidates beyond tests and interviews, examining factors such as frequent payment defaults and excessive debt. A credit score of 650 and above can significantly improve the chances of a smooth hiring process, while a low credit score may lead to disqualification.
Checking the credit score of applicants is not illegal. In the banking sector, the Reserve Bank of India (RBI) has established guidelines for employee credit checks. However, employers are unable to directly access the credit score or history of an applicant. The employer obtains the credit profile with the applicant’s consent solely for the purpose of background verification.
Job applicants in the banking or finance sector should proactively review their credit scores and reports several months ahead of time. The importance of addressing any issues found in the credit report by promptly contacting the bank and credit bureau for timely rectification. Having updated loan statements or a no-dues certificate readily available to provide to the employer if discrepancies arise in the report.
Applicants should recognize that enhancing their credit score is a gradual process, not achievable overnight. To boost the credit score, timely payment of bills, encompassing credit card payments, rent, utilities, and other obligations. Another strategy involves managing card expenditures, either by limiting them to 50 percent of the limit or, conversely, by increasing the card spending limit. The importance of maintaining the overall credit utilization ratio (CUR) at 30 percent or below, representing the percentage of a borrower’s total available credit currently in use.
Conclusion
The scrutiny of credit reports, now a common practice in the BFSI sector, is poised to extend its reach across diverse industries. Employers, emphasizing credit history over a mere credit score, seek insights into an individual’s financial responsibility and potential risks. Beyond tests and interviews, credit scores are becoming pivotal in determining a candidate’s suitability, with a score of 650 and above seen as a gateway to a smoother hiring process.
In short, the symbiotic relationship between credit scores and job opportunities underscores the need for individuals to navigate the credit score maze consciously. As the employment landscape continues to evolve, understanding and actively managing one’s credit profile become indispensable elements for a successful and prosperous career journey.
