Do You Do a Credit Check on Card Applicants?

Should you give a card to an employee with a poor credit history? This was a question someone asked me recently because his company was undecided about how to proceed. More on that below, including my opinion and related recommendations, but I also welcome diverse comments on the matter. Ultimately, every organization should be prepared to address this issue.

The Situation

The person who approached me works in the financial services industry. His company was interested in giving a Commercial Card (P-Card) to an executive assistant whose job responsibilities included making purchases and paying bills. However, when a routine credit check revealed the employee had a poor credit history, it sparked internal debate among senior management. Some thought the assistant should have a card, but with extra controls, such as low spend limits. Others disagreed with card issuance altogether. (It is unknown whether the credit check occurred before, or some time after, this person was hired). On a separate note, the employee had a clear criminal background check.

My Opinion

As I expressed to the person who contacted me, having a poor credit history does not mean a person will commit fraud. Nor does a clean credit check indicate a person will not commit fraud.

Since the employee in question was already hired and the job role involved procure-to-pay (P2P) duties, then she should have a card like anyone else in her same position. The caveat to my opinion is that this company, like every card-using organization, should be following Purchasing Card control best practices. Beyond that, I would be inclined to audit this employee’s card activity more often (if audits occur manually). Having an automated auditing solution would naturally address this. It is also important to remember that Commercial Cards have the added protection of liability waivers.

Conversely, by not giving the employee a card or by issuing a card with restricted usage, the company would need some sort of alternative process to cover her P2P responsibilities.

As demonstrated by the countless news stories on internal fraud, the real problem is organizations that are lax about controls and oversight, especially concerning long-time employees.

Related Resource

Report to the Nations on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE), which includes a section on perpetrators.

What Else to Do

Credit checks are common, but has your organization defined the following details?

  • When will credit checks occur—pre-employment only or at certain intervals?

  • Which applicants/employees are subject to the process?

  • What type of results warrant specific action? For example, what would prevent someone from being hired and/or being issued a card?

While some situations will not fit into a neat box, establishing general parameters can help guide organization decision making. 

Would you give a Commercial Card to an employee with poor credit history?

Would you give a Commercial Card to an employee with poor credit history?

Educational Opportunities Related to Fraud Prevention

  1. Sign up to participate (no charge) in the AP Fraud Prevention Week by AP Now, October 7–11, 2019. Visit AP Now for details.

  2. Encourage your auditors to register for the October virtual workshop on Purchasing Card audits, sponsored by The Institute of Internal Auditors/Public Sector™ Audit Center. For details, including registration, visit The IIA website.

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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more