A Guide to the States that Ban Credit Checks for Employment

When hiring, vetting and due diligence procedures often focus on elements such as criminal background information. However, an employer frequently needs to go beyond criminal histories to learn more about an individual’s suitability. Reference checks and employment or education verification fall into this category. So, too, do credit checks. For positions involving financial responsibility, an employer may wish to know that someone is fiscally responsible in their personal life. However, several states ban credit checks for employment purposes.

The laws in these states range from outright bans to more nuanced approaches with built-in exemptions. Employers hiring in such states must understand the rules to follow and restrictions to respect. Compliance is critical. In this article, we review the significant regulations in states and cities that restrict the use of these reports when making hiring decisions. First, an important question: why would states enact such legislation at all?

The Reasoning Behind Credit Check Bans

An individual’s credit report contains much personal information, from payment history and credit score to how much debt they have. For positions of financial responsibility or trust-based jobs, checking that information may provide essential insight into someone’s character. However, some employers may use these reports to unfairly disqualify or discredit applicants in jobs where personal financial habits are irrelevant.

That practice can artificially limit opportunities for those struggling with debt. As a result, ten states have enacted restrictions on employers who order credit reports. The goal is simple: limit hiring considerations to the most relevant information.

As we’ll see, there are often exceptions, even in states with bans. Many states recognize the legitimate purposes of consulting credit checks, especially when hiring for financial roles. However, there is also the potential for their discriminatory misuse. States hope to level the playing field by passing laws that specify narrow circumstances for allowing the use of credit reports. Preventing the unfair use of credit data should, legislators hope, continue to expand employment opportunities.

The States That Restrict Credit Checks

Each state adopts its own approach to credit check restrictions. Here, we’ll briefly review the major points of each state’s laws and any exceptions they provide. If you operate in one of these states, consult with an employment attorney or review the statutes directly to ensure an unambiguous, complete understanding of all the law’s provisions.


California restricts the usage of credit reports for employment considerably. Most employers can’t consider credit as part of a hiring decision. However, there are exceptions for managers and roles that involve handling $10,000 or more in cash daily. If a law otherwise requires a credit check, employers may still do so. Police officers, Department of Justice employees, and those who can issue signatures on behalf of the employer for financial reasons are also exempt.

As with other regulated consumer reports, you must follow an adverse action process to disqualify candidates. Refer to the FCRA guidelines on this subject, as the FCRA applies to every state regardless of its restrictions.


Colorado enacted its credit history ban in 2013. This ban is relatively straightforward: except in three specific cases, no employers in the state may use credit history information for hiring purposes. The exceptions are:

  • Banks and other financial organizations may use credit checks when hiring employees.
  • Roles where the law already requires a credit check.
  • The employer can demonstrate a bona fide purpose for using the information when the report is critically related to the job.

Due to the open-ended nature of the final exception provision, Colorado employers may wish to work with legal counsel to verify that a job qualifies for an exemption under the law.


Connecticut banned credit checks for employment purposes in 2011. This rule applies to all employers in the state. Like other states, Connecticut has an exemption for legally mandated credit checks and financial institutions. An employer who reasonably believes an employee has broken the law in their duties may order a credit report to investigate.

The substantial relationship-to-the-job test is also in place. If you can demonstrate a valid employment-related reason for ordering a credit report, you may still do so. Such reasons may include roles that involve fiduciary responsibilities, managerial roles, and jobs that involve access to expense accounts. Employees who can access non-financial assets valued at $2,005 or more are exempt from the restriction.


Hawaii was the first state to enact a credit history ban back in 2009. Its law was a model for many others reviewed in this article. At the heart of the law was a ban on credit checks for most job applicants. Employers may only order a report if they make a conditional job offer. They must also clearly establish that credit is a bona fide occupational qualification.

Banks and credit unions insured by the Federal Deposit Insurance Corporation (FIDC), and managerial roles are exempt. Where state or federal law requires checks, the law does not apply. All employers in the state are subject to these rules.


In Illinois, credit reports aren’t permissible for employment except in narrow cases such as:

  • The employee will have unsupervised access or control of $2,500 or more in assets.
  • There is a law requiring a security bond.
  • The job is a managerial role.


In Maryland, financial institutions are entirely exempted from the state’s 2011 ban on pre-employment credit checks. Otherwise, employers must again demonstrate a bona fide reason for the check results to relate to the job at hand. Other standard exemptions exist, such as those for managers and roles handling cash or personal data.


Nevada is the tenth and most recent state to ban hiring based on credit status. It restricts this usage to job-related considerations. Specifically, this state also includes employees of licensed gaming establishments. Therefore, many employees of casinos and resorts who might otherwise be exempt may have their credit checked by employers. Exceptions exist when an employer believes a prospective employee has broken the law.


Oregon provides exceptions to its credit check ban for FDIC-insured institutions, legally mandated checks, and law enforcement officers. Again, Oregon is another state that creates a job-related exception but does not provide an extensive definition or test for making that determination. Consulting with counsel in this state may be prudent for Oregon employers.


Enacting its law in 2012, Vermont banned the use of credit checks for most employers in the state. However, as a state home to many corporations, it provides a longer list of exemptions to its law than other states. There are the usual allowances for legally-mandated checks and financial institutions. Other exceptions include:

  • Those with access to confidential financial data.
  • Firefighters and EMTs.
  • Positions of fiduciary responsibility.
  • When employers can show that credit reliably predicts how someone will perform in the job.
  • Those with payroll access.


Washington’s law is short and succinct. In this state, credit checks are prohibited for employment unless otherwise required by law. The only other exception is for critical job-related reasons. Employers must tell applicants, in writing, why they are using credit history information. Working with a legal team to craft a compliant disclosure may be essential here.  

Some Cities Restrict Credit Checks

Although most credit history bans in place today exist at the state level, some larger cities have also taken action. These cities often have large and complex economies anchored in metro areas. Fairness and employment opportunities are a significant focus in these regions. So far, the following cities have restricted credit data.

New York City

New York City has one of the most restrictive credit check bans in the entire country. Private employers in the city simply cannot use these checks. There are very job-specific exceptions alongside the usual opening for other legal requirements. Exceptions include:

  • Bonded positions
  • State roles requiring security clearances
  • Non-clerical roles with access to trade secrets
  • Positions where the employee will be responsible for more than $10,000 in assets

As we can see, a few of these exceptions apply to most private employers. Employers must actively claim an exemption to use a credit report for hiring.


Chicago banned credit checks for employment in 2012, but its restrictions are not as broad as those in New York City. Instead, Chicago carved out exemptions for specific job classes alongside the Hawaii-inspired bona fide occupational requirement. Chicago exempts banking, insurance, and debt collection jobs from credit check requirements. Otherwise, private employers can’t use this information.


In 2021, Philadelphia amended its local rules to enact a credit check ban. Notably, the city removed exceptions for financial institutions and law enforcement. Those groups must also proactively demonstrate why a particular job requires a credit check. Otherwise, private employers should steer clear of such data.

Know the Rules in Your Area and Plan for Compliance

Credit checks offer some jobs for employers making tough decisions. A troubled credit history could be as much of a red flag as a felony criminal record in some cases. However, that doesn’t mean credit data is relevant in every situation. As we’ve seen, numerous states and some cities have decided that stricter guidelines on their use are necessary.

It is vital for employers in the states that ban credit checks for employment to plan accordingly. Know the exceptions if you believe you will need to use these reports. Otherwise, you may need to eliminate them from your hiring processes. Even in states without restrictions, it may be wise to limit the use of credit data to positions where its relevance is apparent. Otherwise, there is the risk of appearing discriminatory. Instead of taking that risk, review your obligations and build your policies with them in mind.


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Michael Klazema

About Michael Klazema The author

Michael Klazema is the lead author and editor for Dallas-based backgroundchecks.com with a focus on human resource and employment screening developments

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