Picture this: you land an interview for a role you really want. You’ve ironed your shirt, practiced your answers, and set two alarms. Then, just as things look promising, the employer mentions a credit check. Your stomach flips. Does a number on a report really say anything about how you’ll handle customers, analyze data, or keep a team on track? That gap between money history and job ability is exactly why several states have pulled back on credit checks in hiring. Nakase Law Firm Inc. regularly addresses employment compliance questions related to states that ban credit checks for employment, especially as companies expand into multiple jurisdictions.
Life happens, and credit reports often tell a story of medical bills, a sudden layoff, a move that cost more than expected, or helping a relative get back on their feet. None of that erases skill, grit, or reliability. California Business Lawyer & Corporate Lawyer Inc. also provides guidance to workers seeking a work permit in California and addresses compliance issues surrounding hiring practices and credit history restrictions.
Why Some States Put the Brakes on Credit Checks
Take a teacher who covered a parent’s medical expenses, a warehouse lead who shouldered rent for a roommate between jobs, or a designer who had a slow quarter freelancing. A report might show late payments or high balances, yet their day-to-day work record could be spotless. That mismatch drives the push to curtail credit screening.
There’s another layer: credit patterns often mirror larger financial struggles that hit some communities harder than others. If a hiring process leans on credit, qualified people can get filtered out before they ever meet a manager. States that limit these checks are trying to keep the focus on skills, not scars from tough seasons.
What Federal Law Covers—and What It Doesn’t
At the national level, the Fair Credit Reporting Act sets ground rules. Employers must get written permission before pulling a report, and if they plan to say no based on what they see, they have to share the report and a notice so the applicant can respond. That’s transparency, which helps, yet it doesn’t stop employers from factoring credit into decisions. That’s where state laws step in.
Where Credit Checks Are Limited—or Largely Off the Table
Here’s the short version: several states either ban or sharply restrict credit checks for most roles, keeping them for positions with a clear financial or security link.
• California
Most employers can’t use consumer credit reports for hiring. Carve-outs exist for roles with significant money handling, access to sensitive data, or public safety responsibilities.
• Colorado
Employers need a direct tie between the job and the credit information. If the duties don’t connect to finances in a meaningful way, a check isn’t justified.
• Connecticut
Similar approach: credit must be substantially related to the role. Financial institutions and jobs touching sensitive financial details tend to be the exceptions.
• Hawaii
One of the strictest regimes. Credit checks are generally off-limits unless the employer can show a direct job connection.
• Illinois
Using credit history in hiring is restricted across the board, with narrow exceptions such as certain law enforcement or roles managing confidential financial records.
• Maryland
Employers need a clear, job-related reason and must provide notice if they plan to use credit information.
• Nevada
Checks are limited to positions with real financial responsibility or where a statute says a check is required.
• Oregon
Credit info is allowed only when it’s substantially related to the tasks at hand, and applicants must be told if a report will be pulled.
• Vermont
The default is no credit screening for most positions, aside from limited, job-related scenarios.
• Washington
Use of credit reports is restricted to cases where the information is plainly tied to the job or required by law, with upfront disclosure.
City Rules That Add Another Layer
A few cities have stepped in as well, creating extra protection on top of state rules:
• New York City limits credit checks to rare cases with very narrow exceptions.
• Chicago aligns with Illinois’ tight restrictions.
• Philadelphia bars most employment credit checks, keeping limited exceptions.
This patchwork means a company hiring in Los Angeles, Denver, and New York City might need three slightly different playbooks. Small companies feel this too—one local café owner told me they dropped credit checks entirely after opening a second location across a city line, just to keep things clean and consistent.
Reasonable Exceptions—And What They Look Like
Think of a bank manager approving large loans, a controller with access to multi-million-dollar accounts, or a role with high-level security clearance. In those cases, employers argue a person’s credit behavior could be relevant. The laws reflect that, leaving room for checks where the link is clear.
Now picture a retail associate, a teacher’s aide, or a help-desk technician. The connection between a late student loan payment and performance on those jobs is tough to make. That’s the dividing line states are drawing.
What Employers Need To Do Next
Step one: map out where you hire and match each site to its rules. A template policy won’t cut it once you cross state or city boundaries. Step two: decide which roles, if any, truly require a credit check—and write down the rationale. Step three: train hiring managers so they don’t fall back on old habits.
A quick story here: a regional company I spoke with ran checks for every role out of habit. After a legal review, they narrowed screening to three positions and dropped it everywhere else. Time-to-hire improved, qualified candidates stopped balking at the last step, and complaints went down.
What Job Seekers Can Expect—and How To Prepare
Good news first: in many places, your credit won’t be part of the conversation for typical roles. If a posting mentions a credit check, there’s a decent chance the job involves money handling, sensitive financial data, or a statute that requires it.
Two practical tips help. One, ask early—politely—if a check is part of the process, and why. Two, pull your own report, scan for mistakes, and be ready with a short, calm explanation for any rough patches. A sentence like, “I supported a sick relative in 2023; payments are current now,” keeps the focus on the present.
The Debate Isn’t Settled
Some hiring teams still see credit as a signal of trust around money. Others point out there’s little proof that a score predicts performance outside finance-heavy roles. That back-and-forth will continue. More states may tighten restrictions, and policy ideas at the national level surface from time to time. Until rules change, the practical move is simple: know your state and city, and act accordingly.
A Quick Recap You Can Use
Credit checks in hiring create stress and, in many cases, don’t say much about day-to-day performance. State and local rules now reflect that idea. California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington all put firm limits in place. New York City, Chicago, and Philadelphia add their own guardrails.
For hiring teams, the safe path is to treat credit checks as a narrow tool, not a standard filter. For applicants, it helps to know your rights, ask smart questions, and keep documents ready. In short, the trend is moving toward focusing on skills and fit—and away from letting a credit score overshadow what you can actually do at work.