Credit Scores & Recruitment in SA

It has become increasingly commonplace for South African employers to consider the credit record of a job applicant as part of the recruitment process. Doing so precludes any applicant with a bad credit record from the possibility of employment unless he could settle or renegotiate his outstanding debts; a challenging task for a person who might not currently be employed, whether due to retrenchment or otherwise.

Business would argue that this is a reasonable measure as someone who has a poor credit record is more likely to steal, or commit fraud; but is it really?

Interestingly, no South African study has found any evidence linking credit behaviour to workplace fraud, corruption, or other forms of dishonest behaviour. This forces a look abroad, to the USA, where Transunion (an American provider of credit reports) themselves admitted during a legislative hearing that job performance and dishonesty does not correlate with credit scores. Interestingly, Transunion is one of the dominant credit score providers in South Africa, and stand the most to lose if the practice is banned.

Ironically, it is already banned, because the Employment Equity Act prohibits the use of psychometric instruments that have not been proven to be valid and reliable for recruitment purposes. I will agree that a credit report is not a psychometric instrument, but employers are definitely trying to use it as one regardless of the stipulations of the Act.

If this practice continues, it will bolster the wedge between rich and poor, and fill our workplaces with employees who have the right credit history, instead of the right skills. However, it is unlikely for business to interrogate and correct itself without the proper incentives in place. For this reason, I would like to encourage labour unions to do so on their behalf, thereby assisting all South African job seekers by ensuring that they are judged fairly and accurately when looking for work.