Can An Employer Not Hire You Based On Your Credit? It Depends Where You Live

By John Atkins

Hypothetically speaking, let's say that you're about to get a new job with an employer who is going to pay you substantially more than you made at your last job. You've gone in for multiple interviews, even met the supervisor you could be reporting to, and talked to an HR representative about the details of your employment package.

You're pretty much hired, they just need to check your references and since you're living in Austin, Texas and you're not a military veteran, then the hiring manager decides to check your credit report.

Turns out that you've got a couple collection agencies trying to collect past due medical bills from you and it's negatively impacting your score. Your prospective boss is a sensible guy, but he's steeped in an old business tradition and feels like since you didn't take the time to pay your medical bills then you may not take the time to do important things at your company. So instead of hiring you, he hires someone less qualified, but who possesses a better three digit number than you do.

Sounds crazy, right?

State-by-state use of credit information in employment

If you live in 1 of the 40 states including the District of Columbia that have no past or previous or pending laws about how employers use credit information to make employment decisions, then you could be subjected to the type of treatment outlined in the hypothetical story above.

At Self, we think that it's ridiculous that you need credit to build credit, but we think it's even more preposterous that you could have opportunities such as employment taken away from you for having bad credit.

The following are three state-by-state lists that show you which states have no pending or past laws, pending laws, and laws for use of credit information by employers during the hiring process.

There is also a full alphabetical state-by-state list at the bottom.

No pending or past laws

In the following states, employers can discriminate against you based on your credit score, because each of these states lawmakers have no laws that state that employers cannot discriminate based on your credit history.

State Prohibition Exceptions Penalties Status
Alabama No pending/passed legislation N/A N/A N/A
Alaska No pending/passed legislation N/A N/A N/A
Arizona No pending/passed legislation N/A N/A N/A
Florida No pending/passed legislation N/A N/A N/A
Idaho No pending/passed legislation N/A N/A N/A
Indiana No pending/passed legislation N/A N/A N/A
Iowa No pending/passed legislation N/A N/A N/A
Kansass No pending/passed legislation N/A N/A N/A
Kentucky No pending/passed legislation N/A N/A N/A
Louisiana No pending/passed legislation N/A N/A N/A
Maine No pending/passed legislation N/A N/A N/A
Minnesota No pending/passed legislation N/A N/A N/A
Mississippi No pending/passed legislation N/A N/A N/A
Montana No pending/passed legislation N/A N/A N/A
Nebraska No pending/passed legislation N/A N/A N/A
New Hampshire No pending/passed legislation N/A N/A N/A
North Dakota No pending/passed legislation N/A N/A N/A
Oklahoma No pending/passed legislation N/A N/A N/A
Rhode Island No pending/passed legislation N/A N/A N/A
South Carolina No pending/passed legislation N/A N/A N/A
South Dakota No pending/passed legislation N/A N/A N/A
Tennessee No pending/passed legislation N/A N/A N/A
Utah No pending/passed legislation N/A N/A N/A
Virginia No pending/passed legislation N/A N/A N/A
West Virginia No pending/passed legislation N/A N/A N/A
Wisconsin No pending/passed legislation N/A N/A N/A
Wyoming No pending/passed legislation N/A N/A N/A

States with pending legislation

Here are the states, where there has been some legislation introduced, but no laws implemented, so it's still possible for a prospective or current employer to base their employment decisions on your credit.

State Prohibition Exceptions Penalties Status
District of Columbia An employer may not make an inquiry about or require an applicant to disclose or reveal his or her credit history The prohibition does not apply where a federal or District law or regulation requires the consideration of an applicant's credit history for the purposes of employment. After extending a conditional offer of employment, an employer may only withdraw the offer to an applicant or take adverse action against an applicant for a legitimate business reason. A fine of up to $1,000 for employers that employ 11 to 30 employees; a fine of up to $2,500 for employers that employ 31 to 99 employees; or a fine of up to $5,000 for employers that employ 100 or more employees. Pending
Georgia No employer may (1) request or require that an employee or prospective employee consent to or provide the results of a credit check as a condition of employment; (2) obtain a credit check or cause a credit check to be obtained that pertains to an employee or prospective employee; or (3) fail or refuse to hire, bar, discharge from employment, or otherwise discriminate against an employee or prospective employee because of information contained in a credit check unless the information contained in such credit check is a bona fide occupational qualification or such credit check is otherwise required by law. The prohibition does not apply if the information in the credit history or credit report directly relates to a bona fide occupational qualification or if the credit report is required by law. The prohibition also does not apply to: (1) employers which are federally insured banks or credit unions; or (2) employers which are required by state or federal law to use individual credit history for employment purposes. First offense is a misdemeanor punishable by a fine between $500-$1000. Subsequent offenses are misdemeanors of a high and aggravated nature punishable by a fine between $1000-$2500. Employer may also be subject to damages, injunctive relief, and reasonable attorney's fees and court costs. Pending
Massachusetts No person, including an employer, prospective employer, employment agency, employment screener or licensing agency, shall (1) use a consumer report in connection with or as a criterion for an employment purpose, including decisions related to hiring, termination, promotion, demotion, discipline, compensation, or the terms, conditions or privileges of employment; (2) request or procure a consumer report for the purposes described in clause (1); (3) ask an employee or applicant about his or her consumer report or about any information contained therein regarding credit worthiness, credit standing or credit capacity. The bill also prohibits retaliation. This prohibition shall not apply if an employer is required by federal or state law to use a consumer report for employment purposes. If an employer obtains, uses, or seeks to obtain a consumer report pursuant to federal or state law, the employer shall (1) obtain the employee's or applicant's written consent in a document consisting solely of the consent, each time the employer seeks to obtain the employee's or applicant's consumer report; (2) disclose in writing to the employee or applicant the employer's reasons for accessing the consumer report, and if the employer intends to take an adverse employment action in whole or in part based on the report, disclose the reasons for the action, including which information in the report the employer is basing the decision on, in writing at least 14 days prior to taking the action, along with a copy of the report and the notice of consumer rights required by section 1681G(c)(1) of chapter 15 of the United States Code. The employer shall provide the employee or applicant, in a private discussion, the opportunity to dispute the relevance of the information upon which the employer based the adverse employment action, and shall consider any such dispute before making a final decision; (3) if the employee or applicant provides oral or written notice to the employer during the 14 day period set forth in subparagraph (2) that he or she has disputed the accuracy of the consumer report with a consumer reporting agency, the employer shall not take an adverse employment action until the resolution of the dispute under section 58 of this chapter or Section 1681i(a) of chapter 15 of the United States Code, and shall consider the results of any such resolution; (4) ensure that none of the costs associated with obtaining a consumer report are paid by or passed on to the employee or applicant. Non specified Pending
Michigan An employer shall not fail or refuse to hire or to recruit an individual for employment because of the individual's credit history or inquire about a job applicant's or potential job applicant's credit history. The bill also prohibits retaliation. The prohibition does not apply if a good credit history is an established bona fide occupational requirement for the position, including an employee of certain financial institutions, credit unions, casino, or an employee of an insurer if the employee is working in a fiduciary capacity. Injunctive relief, damages, or both, including costs and attorney's fees for prevailing plaintiff. Pending
Missouri An employer shall not require an employee or prospective employee to consent to a request for a credit report that contains information about the employee's or prospective employee's credit score, credit account balances, payment history, savings or checking account balances, or savings or checking account numbers as a condition of employment. The prohibition does not apply if the employer is a financial institution, or the report is required by law. Not specified Pending
New Jersey No employer may require a current or prospective employee to provide consent to the creation of a credit report that contains information about the current or prospective employee's credit score, credit account balances, payment history, savings or checking account balances, or savings or checking account numbers. The prohibition does not apply if the employer is required by law to obtain a credit report, or the employer reasonably believes that the employee has engaged in specific activity that is financial in nature and constitutes a violation of the law. Additionally, the prohibition does not apply if credit history is a bona fide occupational qualification of a position, including a position that: is a managerial position; involves access to financial information not customarily provided in a retail transaction; involves a fiduciary responsibility to the employer; provides an expense account for travel; or is a law enforcement officer. Injunctive relief, damages, or both, including costs and attorney's fees, and additional civil penalties. Pending
New Mexico An employer shall not fail or refuse to recruit, or interview a prospective employee with respect to employment based on that person's credit information. The prohibition does not apply if information is an established bona fide occupational requirement of a particular position. Information is not a bona fide occupational requirement unless the position: requires Federal Deposit Insurance Corporation clearance; is at a financial service institution; requires United States security clearance; or requires a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money, or enter contracts. Injunctive relief or damages or both Pending
New York No employer, employment agency, licensing agency or agent shall use information in a consumer credit report of a job applicant or employee in connection with or as a criterion for employment decisions related to hiring, termination, promotion, demotion, discipline, compensation, or the terms, conditions or privileges of employment. No employer shall request the job applicant's or employee's credit history for such purpose, nor refuse to hire a job applicant on the ground that he/she refuses to give consent for the employer to obtain a credit report. The prohibition does not apply if the employer is required by state or federal law to consider an applicant's financial responsibility or status. Injunctive relief, the actual damages or $3,500 (whichever is greater), or both, including costs and attorney's fees, and additional civil penalties up to $2,000 for each violation. If the court finds the employer willfully or knowingly violated this law, it may increase the damages award to an amount not to exceed three times the actual damages, up to $10,000. Pending
North Carolina No employer shall refuse to hire, discharge from employment, or discriminate against an individual in compensation or the terms, conditions, and privileges of employment because of the individual's credit history or credit report. The prohibition does not apply if: (1) the information in the individual's credit history or credit report directly relates to a bona fide occupational qualification; (2) the employer is expressly permitted by state or federal law to inquire into an individual's credit history for employment purposes; or (3) the employer is a financial institution in which deposits are insured by a federal agency having jurisdiction over the financial institution. The inquiry into and consideration of a prospective employee's credit history or credit report may take place lawfully only after the prospective employee has received a conditional offer of employment. none specified Pending
Ohio Amends Ohio's Civil Rights Law; It is considered a discriminatory practice to use a person's credit rating or score or consumer credit history as a factor in making decisions regarding that person's employment N/A None specified Pending
Pennsylvania No employer or potential employers shall procure a consumer report or investigative consumer report, or cause either to be procured, for purposes of employment or making an adverse employment action if any information contained in the report bears on the employee's or potential employee's credit worthiness, credit standing, or credit capacity. The prohibition does not apply if the information is required by law or if the consumer applies for or currently holds (1) employment that requires national security, Commonwealth security, or FDIC clearance; (2) employment with the Commonwealth or a local government agency that requires the use of a consumer report; (3) a supervisory, managerial, professional or executive position at a financial institution Subject to enforcement and penalties under the Pennsylvania Human Relations Act. Pending
Texas An employer may not consider the credit report or credit information of an applicant who is a "recently returned veteran." A "recently returned veteran" means a veteran who was honorably discharged within two years of the date of an employment application. N/A Not specified Pending

States with implemented laws

Finally, here are the states that will protect you and even fine your employer for using your credit history as a decision in the hiring process.

State Prohibition Exceptions Penalties Status
California An employer or prospective employer shall not use a consumer credit report for employment purposes, unless an exception is present. The prohibition does not apply if the position is a managerial position, a position for which the information contained in the report is required by law to be disclosed or obtained, certain access to bank or credit card information, social security number, and date of birth of any one person, authority to transfer money or enter into financial contracts, access to confidential or not specified law
Colorado An employer shall not use consumer credit information for employment purposes. If an employer relies on consumer credit information, employer must disclose this fact to the applicant or employee. The prohibition does not apply if: (1) the employer is a bank or financial institution; (2) the report is required by law; or (3) the credit information is substantially related to the employee's current job or a potential job and the employer provides a written disclosure to the employee explaining its bona fide purpose for requesting or using the information in the credit report. If an employer relies on consumer credit information to take adverse action, the employer must disclose this fact and the particular information relied upon to the employee or applicant.Exceptions Penalties Status "Substantially related" means the information contained in the credit report is related to the position for which the employee is being evaluated because the position: 1. Constitutes executive or management personnel or officers or employees who constitute professional staff to executive and management personnel, and the position involves one or more of the following: (a) setting the direction or control of a business, division, unit, or agency of a business; (b) a fiduciary responsibility to the employer; (c) access to customer, employee, or the employer's personal or financial information, other than information customarily provided in a retail transaction; (d) the authority to issue payments, collect debts, or enter contracts; or 2. Involves contracts with defense, intelligence, national security, or civil penalties awarded to a prevailing party by the Division of Labor not to exceed $2500 Law
Connecticut An employer may not require an employee or applicant to consent to a request for a credit report as a condition of employment. The prohibition does not apply to financial institutions, if the report is required by law, if the employer reasonably believes that the employee has engaged in specific activity that constitutes a violation of the law related to the employee's employment, or if the report is substantially related to the job or the employer has a bona fide purpose for requesting or using information in the credit report that is substantially job-related and is disclosed in writing to the employee or applicant. Jobs for which a credit report is substantially related include managerial jobs, jobs with access to personal or financial information not customarily provided in a retail transaction, jobs with fiduciary responsibility, jobs with an expense account or corporate credit card, access to confidential or proprietary information, or access to non-financial assets valued at $2,005 or more. $300 penalty for each violation Law
Delaware A public employer may not inquire into the credit history or credit score of an applicant in the initial stages of the application up to and including the first interview A public employer may inquire into or consider an applicant's credit history or credit score after it has been determined the applicant is otherwise qualified and the applicant has completed the first interview. Not specified Law
Hawaii It shall be an unlawful discriminatory practice for any employer to refuse to hire or employ or to bar or discharge from employment, or otherwise to discriminate against any individual in compensation, terms, conditions, or privileges of employment because of the individual's credit history or credit report Inquiry into and consideration of a prospective employee's credit history or credit report may take place only after the prospective employee has received a conditional offer of employment, which may be withdrawn if information in the credit history or credit report is directly related to a bona fide occupational qualification This prohibition does not apply if the employer is expressly permitted or required to inquire into an individual's credit history for employment purposes pursuant to federal or state law, or to managerial or supervisory employees, or certain financial institutions. Affirmative action, including, but not limited to, hiring, reinstatement, or upgrading of employees with or without backpay, and costs, including attorney's fees. Law
Illinois An employer shall not: fail or refuse to hire or recruit, discharge, or otherwise discriminate against an individual with respect to employment, compensation, or a term, condition, or privilege of employment because of the individual's credit history or credit report; inquire about an applicant's or employee's credit history; or order or obtain an applicant's or employee's credit report from a consumer reporting agency. The law also prohibits retaliation for filing a complaint, supporting an investigation, or opposing a violation under the Act. The prohibition does not apply if satisfactory credit history is a bona fide occupational requirement of a particular position, which requires that one of the following circumstances is present: state or federal law requires bonding or other security covering an individual holding the position, the duties of the position include custody of or unsupervised access to cash or marketable assets valued at $2,500 or more, the duties of the position include signatory power over business assets of $100 or more per transaction, the position is a managerial position which involves setting the direction or control of the business, the position involves access to personal or confidential information, trade secrets, or State or national security information, the position meets criteria established by the U.S. Department of Labor of the Illinois Department of Labor, or the employee's or applicant's credit history is otherwise required by or exempt under federal or State law. Injunctive relief, damages, or both, including costs and attorney's fees to prevailing plaintiff. Law
Maryland An employer may not use an applicant's or employee's credit report or credit history in determining whether to deny employment to the applicant, discharge the employee, or determine compensation or the terms, conditions, or privileges of employment. The prohibition does not apply to an employer that is required under federal or state law to inquire into an applicant's or employee's credit report or credit history, certain financial institutions, credit unions, and investment advisors. Additionally, the prohibition does not apply if the employer has a bona fide purpose for requesting or using the information that is substantially job-related and disclosed in writing to the applicant or employee. Examples of this type of position include managerial positions, positions with access to personal information not customarily provided in a retail transaction, positions with fiduciary responsibility, positions with an expense account or corporate credit card, or positions with access to confidential or proprietary information. Up to $500 for an initial violation; up to $2,500 for a repeat violation. Law
Nevada Employers may not (a) directly or indirectly require, request, suggest or cause any employee or prospective employee to submit a consumer credit report or other credit information as a condition of employment; (b) use, accept, refer to or inquire concerning a consumer credit report or credit information; (c) discharge, discipline, or discriminate against any individual who refuses or declines to submit a credit report; or retaliate against any individual who files a complaint or exercises his/her rights under this statute. This prohibition does not apply if: (1) the employer is required or authorized by law to use a credit report; (2) the employer reasonably believes the employee or applicant engaged in activity violating law; or (3) the information contained in the report is reasonably related to the position which the employee or prospective employee is being evaluated for; the information in a credit report is deemed reasonably related if the duties of the position involve: 1. The care, custody and handling of, or responsibility for, money, financial assets, corporate credit/debit cards, or other assets; 2. Access to trade secrets or other proprietary or confidential information; 3. The direct exercise of law enforcement authority as an employee of a state or local law enforcement agency; 4. The care, custody, and handling of, or responsibility for, the personal information of another; 5. Access to the personal financial information of another person; 6. Employment with a financial institution that is charted under state or federal law; 7. Employment with a licensed gambling establishment Liability is imposed for any legal and equitable relief as deemed appropriate also an administrative penalty of no more than $9,000 for each violation may be imposed Law
Oregon It is an unlawful employment practice for an employer to obtain or use for employment purposes information contained in the credit history of an applicant for employment or an employee, or to refuse to hire, discharge, demote, suspend, retaliate or otherwise discriminate against an applicant or an employee with regard to promotion, compensation, or the terms, conditions or privileges of employment based on information in the credit history of the applicant or employee. The prohibition does not apply to: employers that are federally insured banks or credit unions; employers that are required by state or federal law to use individual credit history for employment purposes; public safety officers; or positions for which the information is substantially job-related and the employer's reasons for the use of such information are disclosed to the employee or prospective employee in writing. Injunctive relief damages, or both, including costs and attorney's fees to prevailing party Law
Vermont An employer shall not: fail or refuse to hire or recurit discharge, or otherwise discriminate against an individual with respect to employment, compensation, or a term, condition, or privilege of employment because of the individual's credit report or credit history; or inquire about an applicant or employee's credit report or credit history. The law also protects employees or applicants from retaliation. The prohibition does not apply if: the information is required by state or federal law or regulation; the position of employment involves access to confidential financial information; the employer is a certain financial institution or credit union; the position is that of law enforcement officer, emergency medical personnel, or firefighter; the position requires a financial fiduciary responsibility; the employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position of employment; or the position of employment involves access to an employer's payroll information. Even if the prohibition does not apply, an employer may not use the information as the sole factor in decisions regarding employment, compensation, or a term, condition, or privilege of employment. An employer seeking to obtain or act upon an employee's or applicant's credit report or credit history shall: obtain the employee's or applicant's written consent each time the employer seeks to obtain the employee's or applicant's credit report; disclose in writing to the employee or applicant the employer's reasons for accessing the credit report; ensure that none of the costs associated with obtaining an employee's or applicant's credit report or credit history are passed on to the employee or applicant; and ensure that the information is kept confidential. employment involves access to confidential financial information; the employer is a certain financial institution or credit union; the position is that of law enforcement officer, emergency medical personnel, or firefighter; the position requires a financial fiduciary responsibility; the employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position of employment; or the position of employment involves access to an employer's payroll information. Even if the prohibition does not apply, an employer may not use the information as the sole factor in decisions regarding employment, compensation, or a term, condition, or privilege of employment. An employer seeking to obtain or act upon an employee's or applicant's credit report or credit history shall: obtain the employee's or applicant's written consent each time the employer seeks to obtain the employee's or applicant's credit report; disclose in writing to the employee or applicant the employer's reasons for accessing the credit report; ensure that none of the costs associated with obtaining an employee's or applicant's credit report or credit history are passed on to the employee or applicant; and ensure that the information is kept confidential. Injunctive relief, or damages, or both, including costs and attorney's fees. Law
Washington A person may not procure a consumer report for employment purposes where any information contained in the report bears on the consumer's creditworthiness, credit standing, or credit capacity. The prohibition does not apply if the information is substantially job related and the employer's reasons for the use of such information are disclosed to the consumer in writing, or required by law. Knowing and willfully obtaining information under false pretenses is subject to a fine of up to $5,000 or imprisonment for up to one year, or both. Law

About the author

John Atkins was the community manager for Self.

Written on September 8, 2015

Self is a venture-backed startup that helps people build credit and savings.
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Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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