Credit History Checks in Malaysia: A Guide for Employers

Imagine you’re hiring for a high-level finance role, and you’ve narrowed it down to two candidates.

Both have impressive resumes, but one has a history of late payments and maxed-out credit cards. The other, however, has spotless credit records.

Which one would you trust with our company’s financial health?

Credit history checks can offer a window into a candidate’s financial habits, providing insights that go beyond what’s listed on a resume.

In Malaysia, this is becoming more common, especially for roles dealing with money.

But before you dive into checking someone’s financial past, it’s crucial to understand when it’s necessary, how to do it right, and the legal guidelines that come with it.

In this guide, we’ll walk through the key reasons employers conduct credit checks, the legal dos and don'ts, and how to conduct them ethically and efficiently.

What is a Credit History Check?

A credit history check is when an employer looks at a candidate's financial history to see if they are good at managing money.

This check looks at things like late payments, unpaid debts, or bankruptcies.

It helps employers understand how a person handles their finances, which is important for jobs that deal with money or financial information.

Purpose of Credit Checks in Employment Screening

Credit checks in job screening help employers assess a candidate’s trustworthiness, especially for roles with financial duties.

For jobs involving money or sensitive financial data, understanding a candidate’s financial habits can reveal important details about their professionalism and decision-making skills.

In some industries, a bad credit history could suggest a higher risk of financial mistakes or fraud.

Credit Reporting Agencies in Malaysia

In Malaysia, the two main credit reporting agencies are CTOS and CCRIS.

These agencies play a key role in helping employers assess the financial behavior of candidates, ensuring that hiring decisions are based on comprehensive and accurate financial data.

CTOS (Credit Tip-Off Service)

is a private credit reporting agency that provides credit information on individuals and businesses.

It offers detailed reports that include a person’s credit score, loan history, and payment records.

CCRIS (Central Credit Reference Information System)

is operated by Bank Negara Malaysia (BNM) and provides a comprehensive credit report containing information on an individual’s loans, credit card history, and payment patterns.

Why Employers Conduct Credit History Checks

As an employer, it's important to make sure the candidates you hire are trustworthy, especially when they will be handling company resources.

A credit history check can give you information about a candidate's financial habits, helping you make better decisions.

Here’s why many employers choose to do credit checks.

1. Assessing Financial Responsibility and Trustworthiness

A credit check helps you see how well a candidate manages their money.

If someone has a history of late payments or debt problems, it could show they might struggle with financial tasks at work, which can impact their trustworthiness.

2. Relevance for Specific Job Roles

For jobs where managing money, handling budgets, or working with financial data is key, having a good credit history is important.

Candidates applying for finance, accounting, or managerial positions are especially looked at closely, as these roles carry a lot of responsibility.

3. Risk Mitigation for Fraud or Financial Mismanagement

Credit checks can reveal problems like bankruptcies or unpaid debts, which could mean a higher risk of fraud or financial mismanagement.

This helps reduce the chance of hiring someone who might harm your company's finances.

Legal and Ethical Considerations

In Malaysia, conducting credit checks on potential employees is allowed, but there are important rules to follow.

First, under the Personal Data Protection Act (PDPA), employers must handle personal information, including financial details from credit checks, carefully and securely.

Employers need to protect this data and use it only for the reason it was collected.

Second, you must get the candidate’s consent before doing a credit check. It's not enough to just assume it’s okay.

The candidate needs to know about the credit check, understand why it’s happening, and agree to it.

If you don’t do this, you could face legal issues and harm your company’s reputation.

By following these rules, you'll stay legal and build trust with candidates, showing that you respect their privacy and practice fair hiring.

How to Conduct a Credit History Check

Checking someone's credit history is not something you can do randomly. You need to do it the right way, following the law and respecting the person’s rights.

Here’s a simple guide on how to do a credit check correctly.

1. Get Permission

Before checking anyone’s credit, you need their written permission. This is important to follow the law and respect the candidate’s privacy.

Explain why you need the check and what information will be looked at.

2. Choose a Credit Reporting Agency

In Malaysia, the most common agencies are CTOS and CCRIS, but there are others like Experian Malaysia and Ram Credit Information.

CTOS: A private agency that gives detailed credit reports for both people and businesses.
CCRIS: A government service run by Bank Negara Malaysia (BNM). It's free for individuals but provides basic information.

To get a credit report, follow these steps:

Set up an account with the agency online.
Provide the candidate’s details (name, identification number, and maybe other info).
Pay any fees (some agencies charge for the reports).
Submit your request for the report.
Wait for the report to be ready, which can take a few hours or a few days.

3. Analyze the Credit Report

Look at important details like:

Outstanding debts
Payment history
Bankruptcy records

These tell you about the candidate’s financial habits and reliability. For example, late payments or missed loan repayments might show signs of financial issues.

4. Take the Informed Actions

After checking the report, think about how a poor credit history might affect your decision.

A single missed payment might not be a problem, but if there’s a history of bankruptcy or unpaid debt, it could be a red flag—especially for jobs with financial responsibilities.

The goal is to make the best decision for the role and the candidate’s fit for the job.

Examples of Job Roles Requiring Credit Checks

Credit checks are not needed for every job, but they are important for roles that require handling money or managing finances.

Here are some jobs where credit checks are important:

1. Financial Roles

Positions in finance, accounting, and banking often require credit checks.

These jobs involve managing or advising on money, so employers want to ensure candidates are financially responsible.

For example, accountants and financial advisors need to show they can manage finances well, and banking professionals must prove their trustworthiness with customer financial data.

2. Management Roles

Managers, especially those handling budgets or overseeing financial operations, may need to have credit checks.

They are responsible for making financial decisions and managing company resources, so a good credit history shows their ability to handle financial matters responsibly.

3. Roles with Access to Company Assets

Jobs that give employees access to company funds, like purchasing agents or corporate treasurers, often require a credit check.

Employers want to ensure these employees won’t misuse company assets, as they may be trusted with large sums of money or company credit.

4. Government and Security Roles

Government positions or jobs requiring security clearances often include credit checks.

Financial history can affect a candidate’s suitability for sensitive roles, as employers want to avoid any potential vulnerability to bribery or fraud.

5. Sales and Retail Management

Sales managers or retail managers handling large transactions may also need to have credit checks.

These positions often involve managing company money, and a credit check ensures the candidate can be trusted with these responsibilities.

Frequently Asked Questions (FAQs)

Can employers reject a candidate based solely on poor credit history?

Yes, but only if the credit history is directly relevant to the job role, such as positions involving financial responsibility. Employers should also consider the context of the poor credit record before making a decision.

How frequently can an employer request credit checks for existing employees?

This depends on company policy and the nature of the role. Employers should avoid excessive checks and ensure they have the employee’s consent each time.

Are there alternatives to credit checks for assessing financial reliability?

Yes, alternatives include reference checks, reviewing past employment records, or assessing other financial documents provided by the candidate. These methods may offer additional insights without relying solely on credit history.

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