Begin work on improving credit score a year before applying for BFSI job

Employers are using credit history to assess candidates for roles involving clients' money, credit decisions, and sensitive financial data

A good credit score has long been essential for securing loans. Now, it is also becoming relevant in hiring. According to a recent media report, minister of state for finance Pankaj Chaudhary recently said in the Rajya Sabha that over the past three years, the appointments of 20 candidates selected through the Institute of Banking Personnel Selection were cancelled or offers were withdrawn due to poor credit history.

 

Where are employers using it

 

The use of credit history and credit scores in hiring is most visible in the financial services sector. “Credit score checks are used primarily in banking, financial services, insurance (BFSI), fintech, and non-banking financial companies (NBFCs), especially for roles handling money, credit decisions, or sensitive data,” says Arun Ramamurthy, author of the book Unlock the Power of Your Credit Score.

 

According to Niren Srivastava, group chief human resources officer, Motilal Oswal Financial Services, this practice has been prevalent in the financial services sector for the past 10 years or so. “It is a mandatory assessment in most financial institutions in India now,” adds Rituparna Chakraborty, partner and India lead, True Search.

 

The practice is growing in terms of both penetration and coverage. “Credit history and scores are used for positions such as collections manager, treasury management, credit underwriter, and roles involving access to confidential financial data or client accounts,” says Sonam Chandwani, managing partner, KS Legal & Associates.

 

Ramamurthy says employers check credit history and scores while hiring for senior finance and treasury roles in non-financial companies as well. Chakraborty adds a caveat. “In non-financial sectors, it is more the exception than the norm,” she says.

 

The practice has been more common in the private sector. According to Ramamurthy, public sector banks have now begun to use it. “What is new is its formalisation and visibility in public-sector recruitment,” he says.

 

Why employers check it

 

Employers view a candidate’s credit report and history as indicators of financial discipline. “Credit history offers insight into a candidate’s ability to behave in a responsible manner when dealing with clients’ money,” says Srivastava.

 

Credit history is seen as a proxy for integrity and a possible indicator of vulnerability to fraud or undue influence. “For roles involving money, a poor repayment history may signal higher risk of misconduct or stress-related decisions,” says Ramamurthy.

 

Is it legally tenable?

 

The use of credit scores by employers in India is not expressly prohibited. Experts, however, say that its legality depends on relevance, consent, and proportionality.

 

The use of credit scores is regulated by the Credit Information Companies (Regulation) Act, 2005. Employers must ensure informed consent before accessing such data. “Any usage must be non-arbitrary and rational and in light of the constitutional right to privacy recognised in Article 14 of the Constitution,” says Chandwani.

 

Employers can rely on credit scores in limited, role-specific situations as part of a broader due diligence process. “Using it as a blanket filtering tool across all positions would be legally vulnerable and open to challenge,” says Chandwani.

 

Employers should specify a sound credit score as a prerequisite at the initial stage of hiring. “The Supreme Court and high courts have ruled that employment cannot be rescinded based on a condition that was not in existence at the time of advertisement,” says Varun Katiyar, advocate, Chambers of Varun Katiyar, Supreme Court.

 

A poor credit score cannot be used indiscriminately to reject a candidate for roles unrelated to financial responsibility. That may be seen as arbitrary.

 

Employers should also avoid mechanical rejection without factoring in the context. “They must take into consideration factors such as medical debt, temporary financial distress, or legacy issues,” says Chandwani.

 

Check credit report early

 

Candidates, especially those applying for jobs in the BFSI sector, should review their credit report 6-12 months before applying. They should first examine their repayment track record. This is the factor that has the strongest influence on the credit score. Candidates should also check for defaults, late payments, and overdue accounts.

 

Errors can pull down the credit score. If candidates spot discrepancies in their report, such as a loan they do not recognise or incorrect payment records, they should raise a dispute with the credit bureau. The bureau refers it to the bank or institution that reported the information. Complaints are typically resolved within 30 days.

 

Improving score takes time

 

A credit score depends largely on an individual’s credit history over the past two to three years. “Credit scores improve through sustained and disciplined credit behaviour rather than short-term actions. In many cases, early improvement may be visible within three to six months of consistent actions, such as timely repayments and controlled credit usage,” says Sunil Agithakaliya, chief operating officer, CRIF High Mark. He adds that more meaningful improvement, particularly in cases involving past defaults or prolonged repayment delays, can take a year or longer of sustained positive behaviour.

 

Steps to improve your score

 

• Pay loan EMIs and credit card dues on time
• Pay at least the minimum due on credit cards by due date
• Keep credit utilisation ratio low
• Maintain a balanced mix of secured and unsecured credit

Source: CRIF Highmark