A background check becomes a necessity these days, and many institutions, employers or landlords can ask for one. Clearly, there are times when people want to know your history, be it from a financial or legal standpoint. And yes, more and more companies ask for a background check, especially when there’s so much identity theft and other issues.
Why do companies require financial documents in background checks?
Financial documents are requested because they offer a great idea of that person’s financial behavior. That’s crucial for a landlord, because they know the tenant is able to cover their monthly expenses. Not only that, but an employer will find it easier to hire a professional who is responsible with their money. And if you want a job in the finance sector, then additional screening like this becomes a necessity.
What financial documents are asked during a background check?
The important aspect to note is that every institution has its own requirements when it comes to background checks. But for the most part, everyone will focus on financial documents because they are offering a great insight into how you spend/use your money.
Bank statements
The most commonly requested financial document during a background check tends to be a statement from the bank. These bank statements are important because they offer a summary of your transactions, deposits and balances. An organization can check that, verify the income deposits, along with the account and spending patterns. Most of the time, you need a statement that covers one of the last 3 months.
Pay slip
Aside from that, you can also use a pay slip. These pay slips are a commonly requested financial document and the focus for such a document is to offer details about the earnings of an employee. As mentioned earlier, this can be useful for landlords, because they know they can get paid on a monthly basis. And there are other times when this might be useful, sometimes it becomes necessary for all kinds of businesses.
Tax returns
Sometimes, institutions will look at your tax returns, because that’s where people are reporting their taxes, deductions and income over the year. Those offer a good insight into your financial activity, and can help during a background check. If a person is self-employed and they don’t have a pay slip every month, a tax return will show that they are still getting regular income, which matters. So yes, it does help if you share a copy of the tax returns, just make sure that it’s the latest one.
Credit report
Another financial document that can help in this situation is the credit report. These reports help because they show a person’s borrowing patterns, but also how and when/if they are repaying their debt. And that’s the thing, a lot of the time you will have people whose credit is very bad, which will bring second thoughts to lenders, as they won’t really trust the person in question.
The same thing is valid when it comes to debt or loan records. These records will cover credit card account summaries, personal loan agreements or student loan statements. Reviewing these documents is important for studying the financial responsibility of a person. They are not judging how often you are taking a loan or why. Instead, the focus is on seeing whether you are repaying the loans you are getting and if you are responsible with loans or not.
Investment statements
It’s not the type of document that will be shared every time, but there are situations when an investment statement will come in handy. It gives the means to verify financial assets and these statements can include records from brokerage accounts, investment portfolios and anything in between. It will be a good way to show your financial stability, and it can also be very useful when it comes to large loan approvals, visa applications or high-value financial transactions. In those cases, you need to show that you have assets/finances to back up various claims and situations, so this will be extremely useful.
What if you’re self-employed?
It can be a bit more difficult to show that you are indeed generating some income when you are self-employed. But there are still various methods you can use here, ranging from business bank statements to invoices, contracts with clients or even a profit-loss statement will work.
The main idea is to offer a document which helps you show you’re earning a stable income without having to rely on traditional employment. There are cases when financial advisors or accountants will offer these documents, or you can share them on your own, when necessary.
Preparing financial documents
When you prepare your financial documents, it’s very important to keep a digital copy and also prepare a physical one, where it’s necessary. The documents should always be complete, up to date and clear to read. Don’t alter or edit documents, because organizations want to know that they are 100% authentic, and that will matter a lot.
If you are sending such documents via online platforms, you need to use secured platforms or even encrypted file transfers. That will make sure you are protecting sensitive information, which could become problematic if it falls in the wrong hands.
Make sure that you always protect your financial information and never share it with an organization or people that you don’t know. Emailing such documents is not recommended, unless you are 100% sure that the email pertains to the organization and not a random person. The more focused you are on protecting your info, the better it will be.
Conclusion
As you can see, financial documents can be necessary for background checks, and that’s why you need to be very wary of sharing them only with organizations you trust. Thankfully, there are various financial documents you can share, and all of them will be very handy when it comes to sharing your info and showcasing your identity. Depending on who asks for the background check, there can be different requirements, but they do want to see your financial history, and that alone is incredibly important to think about.
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