Well, it depends. Using credit history in hiring is generally legal under federal law but can be considered discrimination if it disproportionately impacts protected groups (race, sex, age) without being job-related. While federal law permits this practice, more than 10 states restrict it, viewed by many as economic discrimination.
Aspects of Credit Checks in Hiring:
- Legal Standing: The Equal Employment Opportunity Commission (EEOC) considers it legal unless it violates anti-discrimination laws or is not consistent with business necessity;
- Disparate Impact: If a company’s credit check policy excludes minority groups disproportionately, it may violate federal civil rights laws;
- State Restrictions: Many states and cities (e.g., Chicago, NYC, CA, WA) have banned using credit checks unless directly relevant to the position, for example jobs with financial responsibility;
- Fair Credit Reporting Act (FCRA) Rules: Employers must get written permission, notify you before taking adverse action, and allow you to dispute errors;
- Employer Justification: Some employers use credit reports as a proxy for evaluating character or reliability.
As of April 2026, 12 states and several major cities (including New York City and Chicago) have passed laws that strictly limit or ban the use of credit history in employment decisions. The states include:
- California
- Colorado
- Connecticut
- Delaware
- Hawaii
- Illinois
- Maryland
- Nevada
- New York
- Oregon
- Vermont
- Washington
Commonly Restricted Roles:
Laws usually allow exceptions for financial, law enforcement or top-level management positions.
Rights Under the Fair Credit Reporting Act (FCRA)
Even in states where credit checks are allowed, employers must follow strict federal procedures:
- Written Consent: They must provide a standalone written disclosure and obtain your signed permission before pulling a credit report.
- Pre-Adverse Action: If they plan to reject you based on the report, they must first give you a copy of the report and a summary of your rights to allow you to dispute inaccuracies.
- Final Notice: If they ultimately deny you the job, they must provide a final “adverse action notice” including the contact information for the credit reporting agency.
The information and opinions expressed are for educational purposes only and are based on current practice, industry-related knowledge and business expertise. The information provided shall not be construed as legal advice, express or implied.