When Credit Checks Don’t Belong in Hiring: A State-by-State Look

A quick story to set the stage

You finally get that call to come in for an interview. You prep, you show up, you click with the team. Then the manager mentions a credit check, and your stomach drops. Your past medical bills, the pandemic stretch where hours were cut, that tough year after a move—none of it says anything about how well you can lead a shift or close a quarterly project, yet it might decide your fate. Nakase Law Firm Inc. provides guidance to both employers and employees on laws in states that ban credit checks for employment, ensuring compliance and protection of rights. And if hiring is about trust, here’s a fair question: shouldn’t trust come from references, skills, and behavior on the job?

Where fairness meets real life

The idea behind a credit report is simple: help lenders judge risk. It wasn’t built to predict who will greet customers with patience or who can run a clean audit. Still, credit checks slipped into hiring for thousands of roles that have nothing to do with managing vaults or authorizing transfers. Picture a warehouse applicant turned away over an old foreclosure, or a stellar teacher sidelined because of a medical debt that snowballed. California Business Lawyer & Corporate Lawyer Inc. often advises clients who may be dealing with multiple legal issues, such as applying for a work permit in California while meeting employer hiring requirements. When stories like these pile up, lawmakers take notice—and many did.

What federal rules actually cover

At the national level, the Fair Credit Reporting Act sets the ground rules for process. Employers must ask for written consent before pulling a report. If they make a negative decision based on it, they need to tell you and give you a chance to respond. That’s the framework. The choice of whether to use credit checks at all is left to each state, and that’s where the map starts to look very different.

Where credit checks are limited or off-limits

Across the country, a number of states restrict or bar credit checks for most roles, with narrow carve-outs for jobs where money or sensitive data is central. The big idea is simple: use credit history only when it truly connects to the work.

Here’s a fast tour you can skim:

• California: Most roles are off-limits for credit checks, with exceptions for certain managerial or finance-heavy jobs.
• Colorado: Limits credit checks unless the duties make it clearly relevant, like handling large sums daily.
• Connecticut: Mostly restricted, with room for roles tied to confidential financial or security information.
• Hawaii: An early mover that largely bars employment credit checks.
• Illinois: Strong limits, with familiar carve-outs for finance, insurance, and law enforcement.
• Maryland: Allowed only when the role genuinely requires it, such as access to trade secrets or major financial control.
• Nevada: Restricted to cases where the credit data connects directly to the job.
• Oregon: Prohibits use unless the duties make the credit history substantially related; notice is required.
• Vermont: Similar approach—use it only when the job truly calls for it; banks remain a clear exception.
• Washington: Permitted only when the information is job-related or required by law, with notice to the applicant.

Cities that went even further

Some local governments didn’t wait. New York City set one of the toughest examples, keeping credit checks out of nearly all hiring. Philadelphia and Chicago put added guardrails in place too, reinforcing the point: if the role doesn’t hinge on financial access or sensitive funds, a credit score shouldn’t be the gatekeeper.

Why some employers still ask

From a hiring manager’s seat, the thought process can seem straightforward. If a role puts a person near cash, wire permissions, or account controls, they want confidence the person can be trusted around money. That instinct isn’t odd. It’s just that a number from a credit bureau isn’t the only—or the best—way to assess that trust for most jobs.

Why many push back

Critics point out that credit history doesn’t reliably predict job performance. A great analyst can carry student debt. A careful technician can have an uneven score after a family emergency. On top of that, credit reports can contain mistakes—accounts misattributed, balances reported twice, timelines off by months. Should an error like that cost someone a paycheck? Most folks would say no. Laws that curb credit checks aim to keep hiring tied to what matters on the job.

A couple of real-world snapshots

• Mia, a restaurant GM, needed a night manager. She stopped asking for credit checks and leaned on test shifts and reference calls instead. Her turnover dropped because she picked people who could handle a rush and de-escalate tense moments—things a credit report can’t show.
• Jordan, a bookkeeper, carried medical debt after caring for a parent. One employer refused to interview. Another asked for a sample reconciliation, a short working session, and two references. Jordan got the offer and has since closed every month cleanly.

What smart hiring looks like without leaning on credit

Companies in states that ban credit checks for employment can still hire with confidence by focusing on job-fit steps that actually map to performance:

• Match the screening to the duties: skills tests, work samples, or short paid trials.
• Rely on structured reference calls that ask the same questions for every finalist.
• If a credit check is allowed for a narrow role, explain why, get written consent, and apply the same standard to every candidate.

This approach keeps the playing field level and cuts the risk of screening out strong people for reasons that don’t connect to the work.

What job seekers can do right now

If you live in a state with limits or bans, you can ask upfront whether a credit check is part of the process and, if so, why it’s relevant. If it doesn’t fit the law where you live, that’s a red flag worth addressing. Even in places without a ban, remember your FCRA rights: consent comes first, and you get a chance to review anything used against you. A quick personal checklist helps: pull your own report, fix errors, and keep a short, calm explanation ready for any past blips. That kind of prep steadies the conversation.

Where this is heading

Public sentiment leans toward keeping credit history out of most hiring. More states and cities have trimmed the role of credit reports, and the list has grown over time. A single national rule hasn’t landed, yet the pattern is clear: keep the hiring lens focused on skills, reliability, and results.

A closing thought

Work should be judged by work. A person’s story often includes rough patches—health scares, layoffs, a move that didn’t go as planned. Those chapters don’t erase grit, reliability, or talent. States that ban credit checks for employment are pushing hiring back toward what counts day to day. For many applicants, that shift means a fairer shot. For employers, it means better matches and stronger teams, built on what people can do—not on a score that was never meant for hiring in the first place.