States That Ban Credit Checks for Employment: A Compliance Guide for Employers

Important: The information in this article is intended for general guidance for employers and hiring professionals. It is not legal advice, and organizations should consult their legal or compliance advisors when developing hiring or background screening policies. If you are an individual looking to obtain a background check on yourself or inquire about a background report, please contact the screening provider that performed the report or the employer who requested it. Justifacts provides screening services for employers and does not process personal background check requests through this website.

Credit checks can be a useful hiring tool in certain situations, but they are also one of the most misunderstood and heavily regulated components of background screening. Many employers assume they are standard across all background checks, while others are unaware that state laws may limit or prohibit their use entirely.

If your organization operates in multiple states or hires remote employees, understanding where credit checks are restricted is essential. What is allowed in one state may be heavily limited in another, and failing to account for those differences can create unnecessary compliance risk.

This guide breaks down what employment credit checks are, how they are used, and which states have placed limits on them so you can make informed, compliant hiring decisions.

Table of Contents

• What Is a Credit Check for Employment?
• How Employers Use Credit Reports
• Legal Requirements
• States That Ban or Restrict Credit Checks
• Why States Restrict Credit Checks
• Impact on Employers and Job Seekers
• Pre-Employment Credit Checks Explained
• Alternatives to Credit Checks
• The Role of Credit History
• Banks and Credit Check Policies
• Industries Less Likely to Use Credit Checks
• Employer Considerations
• Compliance Considerations
• Why Work with a Screening Partner
• FAQs

What Is a Credit Check for Employment Purposes?

An employment credit check is a type of background screening that provides insight into a candidate’s financial history. Unlike consumer credit checks used for loans or credit cards, employment credit reports are specifically designed for hiring decisions and do not impact the applicant’s credit score.

These reports typically include details such as payment history, outstanding accounts, and patterns of financial behavior. They may also include identifying information like address history, which can help support other screening efforts.

For certain roles, this type of report can add meaningful context. Employers hiring for positions that involve handling money, managing budgets, or accessing sensitive financial data may use a credit check for employment as part of a broader evaluation process. Still, it is not a one size fits all solution and should always be tied to the responsibilities of the job.

How Employers Use Credit Reports in Hiring

Employers are not reviewing credit reports to judge personal circumstances. Instead, they are looking for patterns that may be relevant to the role. For example, repeated issues with financial obligations could raise concerns in a position that involves financial oversight or fiduciary responsibility.

That said, context matters. A credit report is just one piece of a much larger picture. It should never be used in isolation or as a blanket requirement across all roles.

In practice, credit checks tend to be limited to positions such as finance professionals, executives, or roles with access to company funds or sensitive financial systems. For most other positions, they are unnecessary and may introduce more risk than value.

Legal Requirements for Conducting Credit Checks

At the federal level, employment credit checks fall under the Fair Credit Reporting Act. This law outlines how employers must obtain and use consumer reports, including credit reports, during the hiring process.

Before running a credit check, employers must clearly disclose their intent and obtain written authorization from the candidate. If the report influences a hiring decision, employers are also required to follow a structured adverse action process.

While the FCRA provides the foundation, state laws often go further. Many states restrict when credit checks can be used or require employers to demonstrate that the information is directly relevant to the role. This is where compliance becomes more nuanced, especially for organizations hiring across multiple jurisdictions.

States That Ban or Restrict Credit Checks for Employment

Many states and municipalities now restrict or heavily limit the use of employment credit checks rather than imposing absolute bans. In most cases, employers may only use credit reports for specific positions where financial responsibility, access to sensitive information, or fiduciary duties make the screening directly relevant to the role.

State/Jurisdiction	Status	Key Notes
California	Restricted	Limited to managerial, law enforcement, and certain financial roles
Colorado	Restricted	Requires a substantial job-related purpose for the credit check
Connecticut	Restricted	Applies primarily to positions involving financial responsibility
District of Columbia	Restricted	Employers generally cannot request credit reports except for limited exempt positions
Hawaii	Restricted	Credit checks generally permitted only after a conditional offer
Illinois	Restricted	Must be substantially related to the employee’s job duties
Maryland	Restricted	Requires a legitimate business purpose or financial responsibility connection
Nevada	Restricted	Prohibits unnecessary use of employment credit reports
New York	Highly Restricted	Recent legislation significantly limits employer use of credit reports except for narrow exempt roles
Oregon	Restricted	Generally limited to positions with financial or sensitive responsibilities
Vermont	Restricted	Requires a legitimate business purpose and written disclosure
Washington	Restricted	Requires disclosure, consent, and a job-related business justification
Philadelphia	Restricted	Employers generally may not obtain or use credit information for employment purposes

 

Local and Municipal Credit Check Restrictions

Not all employment credit check laws are implemented at the state level. In some cases, cities and local jurisdictions have enacted their own restrictions that may be more stringent than statewide regulations. This can create additional compliance considerations for employers hiring across multiple locations or managing remote workforces.

For employers, this means that compliance decisions cannot always be based solely on state law. A screening practice that may be permissible elsewhere in a state could still be restricted within a specific city or municipality. Because of this, organizations should evaluate employment credit check policies based on where the employee will actually work, not just where the company is headquartered.

Examples of cities and municipalities with notable employment credit check restrictions include:

• Philadelphia: Employers generally may not request or use credit information for employment purposes except in limited exempt situations.
• Chicago: Local protections may apply in addition to Illinois state restrictions, particularly regarding how financial information is considered in hiring decisions.
• New York City: One of the most restrictive jurisdictions in the country, with very limited exemptions allowing the use of employment credit checks.

Because local laws can change and often contain nuanced exemptions, employers should regularly review applicable regulations and work with compliance professionals or experienced screening partners when developing hiring policies.

Why States Have Restricted Credit Checks

State lawmakers have increasingly questioned whether credit history is a meaningful or fair indicator of job performance. While financial responsibility may be relevant for certain roles, a person's credit history is often influenced by factors that have little to do with their ability to succeed in a position.

Life events such as medical emergencies, job loss, divorce, or broader economic downturns can all impact an individual's credit. In many cases, these situations are temporary or unrelated to workplace behavior, which has led regulators to take a closer look at how credit reports are used in hiring decisions.

As a result, several key concerns have driven legislation at the state and local level:

• Limited job relevance: For most positions, credit history does not provide meaningful insight into job performance, reliability, or qualifications.
• Economic bias: Credit reports can reflect socioeconomic challenges rather than individual responsibility, potentially disadvantaging otherwise qualified candidates.
• Inconsistent use: Without clear guidelines, credit checks may be applied broadly rather than selectively, increasing the risk of misuse.
• Privacy considerations: Credit reports contain sensitive financial information, raising concerns about whether that level of detail is necessary for hiring decisions.

Beyond these concerns, there is also a broader push toward fair hiring practices. Regulators and advocacy groups have emphasized the importance of evaluating candidates based on qualifications, experience, and job-related criteria rather than factors that may not be directly relevant.

This has led many states to implement laws that limit when and how credit checks can be used. In most cases, employers are required to demonstrate that a credit report is directly tied to the responsibilities of the role, such as positions involving financial oversight, access to company funds, or sensitive financial data.

For employers, this shift reinforces the need to take a more intentional approach. Rather than applying credit checks as a standard part of the hiring process, organizations are expected to evaluate whether they are truly necessary and ensure their use aligns with both legal requirements and the realities of the role.

Impact on Employers and Job Seekers

Restrictions on employment credit checks have created meaningful changes for both employers and job seekers. While these laws are designed to promote fairness, they also introduce new considerations that hiring teams must account for when building and managing their screening processes.

For employers, the impact is primarily operational and compliance-related. Hiring teams can no longer apply a single, standardized approach across all roles or locations. Instead, they must take a more tailored and intentional approach to background screening.

Key impacts for employers include:

• Increased compliance complexity: Employers must understand and apply different rules depending on the state or city where the candidate is located, which can be especially challenging for remote or multi-state hiring.
• Role-based screening decisions: Credit checks must be tied directly to job responsibilities, requiring employers to evaluate whether financial history is truly relevant before including it in the process.
• Policy adjustments: Organizations may need to revise internal hiring policies and documentation to ensure alignment with current regulations.
• Greater reliance on alternative screening methods: Employers often shift toward other background checks that provide more directly job-related insights, such as employment verification or criminal record checks.

For job seekers, these laws are intended to reduce unnecessary barriers and create a more level playing field. By limiting when credit checks can be used, candidates are less likely to be evaluated based on factors that may not reflect their qualifications or ability to perform the job.

Key impacts for job seekers include:

• Fewer barriers to employment: Candidates are less likely to be screened out due to credit history that may be unrelated to job performance.
• More job-relevant evaluations: Hiring decisions are increasingly focused on skills, experience, and qualifications rather than financial background.
• Improved transparency: Many laws require employers to clearly disclose when and why a credit check is being used, giving candidates better visibility into the process.
• Stronger protections: Regulations help ensure that credit checks are used fairly and only when there is a legitimate business need.

Overall, these changes are pushing hiring practices toward a more targeted and thoughtful approach. Employers are encouraged to align their screening processes with the specific demands of each role, while job seekers benefit from a hiring environment that places greater emphasis on relevant qualifications and experience.

Pre-Employment Credit Checks Explained

How Credit Checks Are Conducted

Employment credit checks are conducted through consumer reporting agencies that compile financial data from various sources. The resulting report is tailored specifically for employment purposes and excludes certain details, such as credit scores.

These checks are considered soft inquiries, meaning they do not affect the applicant’s credit score. This is an important distinction that employers should clearly communicate to candidates.

Common Misconceptions About Credit Checks

There are several common misconceptions that can create confusion during the hiring process. Many candidates believe that a credit check will lower their score, while some employers assume it is a standard part of every background check.

In reality, credit checks are optional and role-specific. They are just one component of a broader screening strategy and should be used selectively.

Alternatives to Credit Checks for Employers

In many cases, credit reports are not the most effective or relevant way to evaluate a candidate. For roles that do not involve financial responsibility, other types of background checks often provide more meaningful insight into a candidate's qualifications, reliability, and potential risk.

Rather than relying on a single data point, employers typically benefit from using a combination of screening services that align more closely with the responsibilities of the role. This approach not only improves hiring decisions but also helps maintain compliance in states where credit checks are restricted.

Common Alternatives to Credit Checks

Criminal Background Checks

Criminal background checks are one of the most widely used screening tools and often provide more directly relevant information than a credit report. These checks help employers identify potential risks related to workplace safety, compliance requirements, and overall organizational liability.

Depending on the role and industry, criminal checks can be tailored to include county, state, or federal records. This flexibility allows employers to focus on the level of detail that makes sense for the position.

Employment Verification

Employment verification confirms a candidate's work history, including previous roles, dates of employment, and in some cases job responsibilities. This helps ensure that applicants have the experience they claim and provides a clearer picture of their professional background.

For many roles, verifying past employment is far more indicative of future performance than reviewing financial history. It also helps employers identify inconsistencies or gaps that may require further clarification.

Reference Checks

Reference checks provide qualitative insight that cannot be captured through data alone. Speaking with former supervisors or colleagues can help employers understand how a candidate performs in real-world situations, including communication style, reliability, and teamwork.

These conversations can offer valuable context that supports more informed hiring decisions, especially when evaluating soft skills and cultural fit.

Address History Verification

Address history verification helps confirm a candidate's identity and provides a record of previous residences. This information is often used to support other background checks by identifying jurisdictions where additional searches may be needed.

While it may seem like a simple data point, accurate address history can play an important role in ensuring the completeness and accuracy of a background check.

Why Employers Are Shifting Toward These Alternatives

As regulations around credit checks become more restrictive, many employers are reevaluating how they approach screening. In most cases, these alternative services provide clearer, more job-relevant insights while reducing compliance risk.

• Greater job relevance: These checks are directly tied to a candidate's experience, behavior, and qualifications.
• Improved compliance: They are less likely to be restricted by state-specific regulations.
• More complete candidate evaluation: Combining multiple screening methods provides a more balanced and accurate view of each applicant.
• Better candidate experience: Avoiding unnecessary credit checks can reduce friction and improve transparency during the hiring process.

Ultimately, the goal is not to replace one screening tool with another, but to build a thoughtful, role-specific approach. By focusing on the information that truly matters for the position, employers can make more confident hiring decisions while staying aligned with evolving compliance expectations.

The Role of Credit History in Employment Decisions

Credit history can play a role in employment decisions, but it is often misunderstood and sometimes overused. In reality, it is one of several tools available to employers and should only be used when it provides meaningful, job-related insight.

How Credit History Can Influence Hiring Decisions

When used appropriately, credit history can offer additional context for roles that involve financial responsibility, access to company funds, or oversight of sensitive financial information. Employers may review patterns such as consistency in managing financial obligations or signs of potential risk that could be relevant to the position.

For example, roles in accounting, finance, executive leadership, or positions with fiduciary responsibilities may warrant a closer look at financial history. In these cases, a credit report can help support a broader risk assessment.

That said, credit history should never be viewed in isolation. Financial challenges can stem from a wide range of circumstances that have little to do with job performance. Because of this, most employers treat credit checks as a supporting data point rather than a deciding factor.

• Best used for: roles involving financial oversight, asset management, or access to sensitive financial data
• Less relevant for: positions that do not involve financial responsibility or decision-making authority
• Most effective when: combined with other screening methods such as employment verification and reference checks

Does a Background Check Include a Credit Check?

No. A background check does not automatically include a credit check. Background screening programs are typically customized based on the role, industry, and employer preferences, and credit reports are added only when specifically requested.

Most standard background checks focus on areas such as criminal history, employment verification, and identity confirmation. Credit checks are considered an additional layer of screening and are usually reserved for roles where financial history is directly relevant.

This flexibility allows employers to build a screening package that aligns with the responsibilities of each position. It also helps ensure compliance with state laws, many of which limit when credit checks can be used.

For organizations evaluating whether to include this type of screening, understanding how a credit check for employment fits into a broader hiring strategy can help guide more informed and compliant decisions.

What Banks Don't Do Credit Checks for Employment?

There is no universal standard across the banking or financial services industry when it comes to credit checks in hiring. Each institution sets its own policies based on the role, level of responsibility, and internal risk management practices. Because of this, it is not accurate to point to a definitive list of banks that do or do not conduct credit checks for employment.

In general, the use of credit checks in banking tends to be role-specific rather than organization-wide. Employers in this space often evaluate whether a credit report is necessary based on the type of work the employee will be performing and the level of access they will have to financial systems or assets.

When Banks Are More Likely to Use Credit Checks

Credit checks are more commonly used for positions that involve financial decision-making, oversight, or access to sensitive information. In these cases, employers may view financial history as one component of a broader risk assessment.

• Roles with lending authority or approval responsibilities
• Positions in accounting, finance, or treasury functions
• Executive or senior leadership roles
• Jobs with direct access to customer financial data or internal financial systems

When Banks May Not Use Credit Checks

For other roles, especially those that are more operational or customer-facing, credit checks may not be necessary or relevant. In these situations, employers often rely on other screening methods that are more closely tied to job performance.

• Entry-level or early career positions
• Customer service or teller roles with limited financial authority
• Operational or administrative positions
• Roles that do not involve financial decision-making or oversight

What This Means for Employers

Rather than following industry assumptions, employers should evaluate each role individually. The key question is whether a credit check provides meaningful, job-related insight that cannot be obtained through other screening methods.

This approach not only supports better hiring decisions but also helps ensure compliance with state laws that restrict the use of credit checks. By aligning screening practices with the responsibilities of the role, organizations can reduce risk while maintaining a fair and consistent hiring process.

Industries Less Likely to Perform Credit Checks

While credit checks can be useful in certain hiring scenarios, many industries rarely rely on them, especially for roles that do not involve financial oversight or access to sensitive financial information. In these environments, employers tend to prioritize qualifications, experience, and reliability over financial history.

Industries that are less likely to use credit checks typically focus on operational performance, customer interaction, or physical job responsibilities rather than financial decision-making. As a result, other types of background checks are often more relevant and widely used.

Industries Where Credit Checks Are Less Common

• Hospitality and Food Service: Roles in restaurants, hotels, and event services are generally focused on customer experience and day-to-day operations rather than financial oversight.
• Retail: Most retail positions, including sales associates and store-level roles, do not require credit checks unless the position involves higher-level financial control or management responsibilities.
• Manufacturing: Hiring decisions in manufacturing environments are typically based on technical skills, safety considerations, and experience rather than financial background.
• General Labor and Skilled Trades: Roles that emphasize hands-on work, physical tasks, or specialized trade skills are unlikely to require a review of credit history.

Why These Industries Typically Avoid Credit Checks

In these sectors, credit history is often not a meaningful indicator of job performance. Employers are more likely to focus on factors that directly impact the role, such as reliability, work ethic, and relevant experience.

• Low financial risk exposure: Many roles do not involve handling money, managing budgets, or accessing sensitive financial data.
• Higher relevance of other screening methods: Criminal background checks, employment verification, and reference checks often provide more actionable insight.
• Faster hiring timelines: Avoiding unnecessary credit checks can streamline the hiring process and improve candidate experience.

Ultimately, the decision to include a credit check should always come back to job relevance. In industries where financial responsibility is not a core component of the role, employers are often better served by focusing on screening methods that more directly reflect a candidate's ability to perform the job.

Employer Considerations

Employers should take a thoughtful and intentional approach when deciding whether to include credit checks in their hiring process. Rather than applying them broadly, the decision should be based on whether the information provides meaningful, job-related insight.

The most important question to ask is whether financial history is directly relevant to the responsibilities of the role. If a position does not involve financial oversight, access to assets, or sensitive financial data, a credit check may add little value and could introduce unnecessary compliance risk.

Key Factors Employers Should Evaluate

• Job relevance: Does the role involve handling money, managing budgets, or making financial decisions?
• Level of responsibility: Higher-level positions or roles with fiduciary duties may justify additional screening.
• Risk exposure: Consider whether the position presents financial or operational risks that a credit check could help assess.
• Candidate experience: Avoiding unnecessary checks can streamline hiring and reduce friction for applicants.

Another critical factor is location. State and local laws governing credit checks often apply based on where the candidate lives or works, not just where the employer is headquartered. This is especially important for organizations hiring remote employees or operating across multiple states.

Because of this, employers should ensure their screening policies are flexible enough to account for geographic differences. A process that is compliant in one state may not be permissible in another, making it essential to evaluate each hire within the appropriate legal context.

Ultimately, a role-specific approach helps employers balance risk management, compliance, and fairness while creating a more effective and consistent hiring process.

Compliance Considerations

Compliance should always be a central focus when using credit checks in employment. These reports are regulated at both the federal and state level, and failing to follow the proper procedures can lead to legal and reputational risks.

At the federal level, the Fair Credit Reporting Act establishes clear requirements for how employers must obtain and use credit reports during the hiring process. These requirements are designed to protect candidate rights while ensuring transparency and accountability.

Core Compliance Requirements

• Disclosure: Employers must provide a clear, standalone disclosure informing the candidate that a credit check may be conducted.
• Authorization: Written consent must be obtained from the candidate before the report is requested.
• Adverse action process: If a hiring decision is influenced by the report, employers must follow a multi-step process that includes providing a copy of the report and allowing the candidate an opportunity to respond.

In addition to federal requirements, many states and local jurisdictions have implemented their own restrictions. These laws may limit when credit checks can be used, require additional disclosures, or mandate that employers demonstrate a clear connection between the report and the role.

Ongoing Compliance Considerations

• Monitoring state and local laws: Regulations can change over time, making it important to stay current with applicable requirements.
• Documenting hiring policies: Clear internal guidelines help ensure consistent and compliant decision-making across teams.
• Training hiring managers: Those involved in the hiring process should understand when credit checks are appropriate and how to use them responsibly.
• Working with a screening partner: Experienced providers can help navigate regulatory requirements and maintain compliant workflows.

Because of the complexity involved, many employers choose to work with background screening partners who can help manage these requirements. Taking a proactive approach to compliance not only reduces risk but also supports a more transparent and fair hiring process for candidates.

Why Work with a Background Screening Partner

Managing credit checks for employment is rarely as simple as deciding whether to include them in your hiring process. Between federal requirements, evolving state restrictions, and role-specific considerations, there are multiple layers of compliance to navigate. What is acceptable in one state may be restricted in another, and that complexity increases quickly for organizations hiring across multiple locations or remotely.

A background screening partner helps bring structure and consistency to that process. Instead of building policies from scratch or trying to track changing regulations internally, employers can rely on established workflows that align with current requirements. This reduces the risk of missteps while also making the hiring process more efficient for both recruiters and candidates.

Beyond compliance, a strong screening partner helps ensure that each component of your background check program is aligned with the role itself. That means using tools like credit checks where they make sense, while relying on other screening methods when they provide more relevant insight. This kind of flexibility is especially important in today’s hiring environment, where one-size-fits-all screening approaches often fall short.

Justifacts works with employers to build customized screening programs that balance compliance, efficiency, and real-world hiring needs. With decades of experience supporting hiring teams nationwide, Justifacts provides:

• Guidance on when credit checks are appropriate based on role and location
• Support for navigating federal and state-specific compliance requirements
• Customizable screening workflows that adapt to your hiring process
• Dedicated, U.S.-based account management for ongoing support

For organizations evaluating financial screening options, exploring a credit check for employment can help clarify how these reports fit into a broader hiring strategy. When implemented thoughtfully and supported by the right partner, credit checks can be a valuable part of a compliant and effective screening program.

FAQs

Does a background check include a credit check?

No. A credit check is not automatically included in a standard employment background check. Employers must specifically request it as part of a customized screening package. Most background checks focus on areas like criminal history, employment verification, or identity checks, while credit reports are typically reserved for roles that involve financial responsibility or access to sensitive financial information.

What states ban credit checks for employment?

Several states and municipalities restrict or heavily limit employment credit checks, including California, Colorado, Illinois, Maryland, Oregon, Vermont, Washington, and New York. Some local jurisdictions, such as Philadelphia and Washington, D.C., also have additional restrictions. Because these laws frequently change and often include exemptions, employers should review current regulations and consult compliance professionals before implementing screening policies.

Do all employers conduct credit checks?

No. Many employers do not use credit checks at all, especially for roles that do not involve handling money, financial decision-making, or sensitive assets. Credit checks are typically limited to industries such as finance, banking, or executive leadership roles. In most hiring scenarios, employers rely on other background screening methods that are more directly tied to job performance and qualifications.

Can I be denied a job due to credit history?

In some cases, yes. Employers may consider credit history when hiring for roles where financial responsibility is a key part of the job. However, they must follow strict legal requirements under the Fair Credit Reporting Act, including providing disclosure, obtaining authorization, and completing the adverse action process if a decision is influenced by the report. Additionally, in states with restrictions, employers must ensure the credit check is job-related and legally permissible.

What banks don’t do credit checks for employment?

There is no standardized list of banks that do or do not conduct credit checks for employment. Hiring practices vary widely depending on the role and level of responsibility. Entry-level or customer service positions may not require a credit check, while roles involving lending authority, financial oversight, or access to sensitive financial systems are more likely to include one. Employers in the financial sector typically evaluate credit checks on a role-by-role basis rather than applying a blanket policy.

Final Thoughts

Credit checks can be a valuable tool when used appropriately, but they require careful consideration and compliance. By understanding state restrictions and aligning screening practices with job responsibilities, employers can make more informed hiring decisions while reducing risk.

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