An employer that runs a “credit check” on a candidate is not looking at a credit score. Employment credit reports and consumer credit scores are two different products built from the same underlying file, and confusing them leads to bad hiring decisions and, in a growing number of states, a legal violation. This article covers what an employment credit report contains, the federal rules that govern it, where states and cities restrict or ban the practice, and how to run one correctly when the role genuinely calls for it.
What an employment credit report actually contains
The report an employer receives through a background screening company is a modified version of a standard consumer credit report. It typically shows open and closed credit accounts, payment history, current balances, public records such as judgments or bankruptcies, and collection accounts. It does not include a three digit credit score. The Consumer Financial Protection Bureau confirms that employers see a version of your credit history, not the score used by lenders, and that a consumer reporting agency cannot release this information to an employer without the applicant’s written consent (CFPB).
Date of birth, account numbers, and certain other identifiers are usually truncated or removed from the employment version of the file. What remains is a picture of how someone has managed debt and financial obligations over time, not a numeric ranking. Treating a thin file, a medical collection, or a single late payment as equivalent to a low credit score is a common and avoidable mistake.
The FCRA rules that apply before you ever look at the file
A credit report used for an employment decision is a consumer report, so the same Fair Credit Reporting Act framework that governs criminal history and other background checks applies. Before requesting the report, the employer must provide a clear, standalone written disclosure that a consumer report may be obtained for employment purposes, and the applicant must sign a separate authorization. The Federal Trade Commission’s guidance for employers lays out these obligations in plain terms: disclose, get written permission, and follow the adverse action process before making a final negative decision (FTC).
These are the same baseline FCRA mechanics that apply to any third party background check, and they sit on top of, not instead of, the state and local credit check laws described below. An employer in a state that permits credit checks for a given role still has to satisfy federal disclosure and authorization requirements. For a fuller walkthrough of how permissible purpose works across background check types, see our guide to FCRA permissible purpose for background checks.
Where state and city law restricts or bans employment credit checks
Roughly a dozen states and several cities have passed laws limiting when an employer can pull a candidate’s or employee’s credit history. The specifics differ by jurisdiction, but the pattern is consistent: a general prohibition on using credit history in hiring or employment decisions, paired with exceptions for roles that genuinely involve financial responsibility, fiduciary duty, or regulatory requirements.
Illinois is one of the more restrictive examples. The Employee Credit Privacy Act bars most employers from inquiring about, obtaining, or using an applicant’s or employee’s credit history or credit report as a basis for employment decisions, with defined exceptions for positions involving bonding requirements, custody of cash or assets over a set dollar threshold, signatory authority over business accounts, management roles that direct the business, or access to confidential financial information (Illinois General Assembly).
New York City takes a similar approach through its Stop Credit Discrimination in Employment Act, enforced by the Commission on Human Rights, which makes it an unlawful discriminatory practice for most employers to request or use consumer credit history in employment decisions, again carving out roles tied to banking, fiduciary responsibility, or law enforcement (NYC Commission on Human Rights).
California restricts, rather than bans outright, employer use of consumer credit reports. Labor Code section 1024.5 limits credit checks to specific categories, including managerial positions, law enforcement roles, positions where the law requires the information, and positions with regular access to bank or credit card account information, and it requires written notice of the specific legal basis before the report is pulled (California Legislative Information).
Other states with their own credit check restrictions and finance-related carve outs include Connecticut, Colorado, Hawaii, Maryland, Nevada, Oregon, Vermont, and Washington, along with cities such as Philadelphia and Chicago. Because the list of covered employers, the size of the exception, and the notice language all vary, treat any general summary, including this one, as a starting point and confirm current requirements against the actual statute or the relevant state labor department before building a policy.
| Jurisdiction pattern | General rule | Typical exception |
|---|---|---|
| Outright restriction states (Illinois, and similar in structure) | Credit checks barred for most positions | Cash custody, signatory authority, bonding, senior management, confidential financial data access |
| City ordinances (New York City, Philadelphia, and similar) | Unlawful discriminatory practice to use credit history | Banking, fiduciary duty, law enforcement, positions requiring a security clearance |
| Conditional restriction states (California, and similar) | Credit checks limited to enumerated job categories | Managerial roles, regular access to bank or credit account information, legally required disclosures |
Where a credit check genuinely fits the role
The exceptions written into these laws point to the same underlying question a screening policy should ask directly: does this role carry real financial responsibility or fiduciary risk. Roles that typically justify a credit check under most state exceptions include positions with signatory authority over company funds, cash handling above a meaningful threshold, treasury or accounting functions, executive and senior management roles that set financial direction, and jobs that require a specific credential or license tied to financial trustworthiness. Banking is the clearest example, and financial institutions carry their own layered set of federal requirements on top of any state credit check exception, which we cover in detail in our guide to background check requirements for bank employees.
Outside those categories, a credit check is hard to justify on job relevance grounds and creates legal exposure with limited hiring signal. The Equal Employment Opportunity Commission has also flagged that broad use of credit history can raise disparate impact concerns under federal anti-discrimination law when it screens out applicants along racial or other protected lines without a clear business justification (EEOC). The safest policy position is to define, in writing, which specific job categories warrant a credit check and why, apply that definition consistently, and skip the credit pull for everyone else.
Adverse action still applies
If information in a credit report leads you toward a negative decision, whether that is declining to hire, withdrawing an offer, or terminating employment, the same two step adverse action process required for any consumer report applies. Send a pre adverse action notice with a copy of the report and the summary of rights, give the person a reasonable window to respond or dispute what the report shows, and only then send the final adverse action notice if the decision stands. Our full breakdown of the sequence and timing is in the FCRA adverse action process guide. Skipping straight to a rejection because a credit report showed a collection account is one of the more common and most litigated FCRA missteps.
Building a defensible policy
A workable approach has four parts. First, identify the specific roles where financial responsibility or a regulatory requirement justifies pulling credit history, and write that justification down before you ever request a report. Second, confirm whether the state or city where the candidate will work restricts or bans the practice, and check the exception language carefully rather than assuming your role qualifies. Third, run the standard FCRA disclosure and authorization steps for every credit check, regardless of state law, since federal requirements apply everywhere. Fourth, if the report contributes to a negative decision, follow the full adverse action sequence rather than shortcutting it.
None of this requires guessing. State labor departments, city human rights commissions, and the federal agencies cited throughout this article publish current guidance, and it is worth checking that guidance directly whenever a new state adds itself to the list or amends its exceptions, which happens more often than most employers expect.
Frequently asked questions
Does an employment credit check show my credit score?
No. The version of the report employers receive shows credit accounts, payment history, and public records, but it does not include the numeric credit score used by lenders. The CFPB confirms that employers see credit history, not a score, and only with the applicant’s written consent.
Can an employer run a credit check without telling me?
No. Under the FCRA, an employer must give a clear, standalone written disclosure and get written authorization before pulling a consumer report, including a credit report, for employment purposes. This applies regardless of what any state credit check law does or does not restrict.
Which jobs are usually exempt from state credit check bans?
Most state and city laws that restrict credit checks carve out roles involving cash handling above a set threshold, signatory authority over company funds, senior management positions, banking and financial services roles, and positions that legally require a credit history disclosure. The exact thresholds and role definitions vary by jurisdiction.
What happens if a credit report shows something negative?
The employer must follow the adverse action process before finalizing a negative decision: send a pre adverse action notice with a copy of the report and a summary of rights, allow a reasonable period for the applicant to respond, and then send a final adverse action notice if the decision stands.
Do these state laws apply if the employer is based elsewhere?
Generally, the law that applies is tied to where the applicant or employee works, not where the employer’s headquarters sits. A multi-state employer needs to check the credit check rules for each state and city where its workforce is actually located.
Ready to build a compliant screening package for roles that genuinely warrant a credit check? See Reveal’s background check pricing for packages that pair credit history with the rest of your employment screening.
Related Reading
This article is general information, not legal advice. State and local credit check laws change and vary by jurisdiction, and this article does not cover every exception or notice requirement. Confirm current rules with the applicable state labor department, city agency, or employment counsel before adopting a credit check policy.
