It's not difficult to understand why nearly half of all credit reports contain mistakes, and why the Federal Trade Commission reports more complaints about the accuracy of credit reports than any other consumer issue. Although information is distributed digitally, someone must manually type the information into the system. That is where the majority of the problems lie. A clerk who inverts two digits on a Social Security number or enters the wrong middle initial can unwittingly merge the records of two different people and generate a trail of misinformation. "A person's life can easily be ruined. They may not be able to get a job," says Evan Hendrix, publisher of Privacy Times newsletter.
How can an HR department ensure data is accurate and that it isn't opening the door for a lawsuit? First of all, Hendrix suggests that a human resources department obtain as much information as possible directly from the applicant and then let that individual know the company conducts background checks. "Be open and upfront about what you need and what you're going to check," he suggests. "If someone chooses not to participate in the process, he or she can say so and not have to feel as though his or her privacy has been invaded."
Another option, says Hendrix, is to let an applicant obtain a credit report on his or her own, and then forward it to the company. That way, if there's an error, the applicant can attach a note of explanation and the matter can be investigated further. As an alternative, a growing number of companies are showing credit reports and background checks to applicants who are turned down. Again, if there's an error that might sway the hiring manager to reconsider, the issue can be resolved without conflict. "The main thing," says Shreveport, Louisiana-based privacy infringement attorney David Szwak, "is to be honest and upfront about what you're checking and make sure the applicant has an opportunity to correct mistakes."
Finally, it's crucial to use only the information that's relevant. That sounds simple enough, but many companies don't follow the rule. That means turning to a motor vehicle check or credit report only if it applies to the position an applicant is seeking. That means avoiding other data—perhaps on a tax lien or a divorce settlement—that has no bearing on the position. Says Szwak: "It's important to think about whether you're solving a problem or creating a bigger one by gathering information about a potential hire."
Personnel Journal, May 1996, Vol. 75, No. 5, p. 80.