Credit Where Credit Is Due: Why Employers Should Be Cautious w/ Credit Checks in Hiring

For years, employers have used consumer credit reports as one tool—among many—to evaluate job candidates. That approach is now rapidly changing. With Governor Kathy Hochul’s recent signing of New York Senate Bill S03072, New York becomes the 11th state to significantly restrict the use of credit history in employment decisions. Effective April 18, 2026, most New York employers will no longer be permitted to consider an applicant’s creditworthiness when hiring.

New York’s law is part of a broader national trend that should prompt employers everywhere to reassess when credit history truly belongs in the hiring process.

The New York Shift: A Strong Signal to Employers

Under the new law, it will be considered a discriminatory practice for most employers to deny employment based on a candidate’s credit score, debt levels, payment history, or other credit-related information. While there are limited exceptions—such as roles required by law to consider credit, certain law enforcement positions, jobs requiring a security clearance, and some roles within financial institutions—the rule will be the exception, not the norm.

Notably, New York goes further than most states by restricting Consumer Reporting Agencies (CRAs) from even providing credit history information to employers. This raises unresolved questions about federal preemption under the Fair Credit Reporting Act (FCRA), but employers should not rely on uncertainty as a compliance strategy.

New York Is Not Alone: The Broader State Law Landscape

New York joins a growing list of states that have concluded credit history is often a poor—and potentially unfair—proxy for job performance. States that have enacted laws restricting the use of credit reports in hiring include:

• California

• Colorado

• Connecticut

• Delaware

• Hawaii

• Illinois

• Maryland

• Nevada

• Oregon

• Vermont

While the details vary by jurisdiction, the underlying principle is consistent: credit history should only be used when there is a clear, direct connection between the credit information and the duties of the job.

Why Credit Checks Are Under Scrutiny

Legislators and regulators increasingly view blanket credit checks as problematic for several reasons. Credit history may reflect medical debt, student loans, divorce, or economic hardship—factors that have little to do with honesty, reliability, or job performance. There are also well-documented concerns about disparate impact, as credit outcomes often correlate with broader socioeconomic inequalities.

For employers, this means the risk associated with routine credit checks is no longer theoretical. It is regulatory, legal, and reputational.

The Compliance Principle Employers Should Follow

Across jurisdictions, one compliance theme stands out: credit history should be used only when it is job-related and consistent with business necessity.

In practice, this means credit checks may still make sense for a narrow set of roles, such as:

• Positions with significant financial authority or fiduciary responsibility

• Roles involving access to sensitive financial accounts

• Jobs where creditworthiness is required by statute or regulation

Even in those cases, employers should be prepared to clearly articulate why credit information is relevant to the specific position—and why less intrusive alternatives would not suffice.

Steps Employers Should Take Now

With New York’s law not taking effect until 2026, employers have time—but not a reason to wait. Smart preparation now can prevent costly compliance missteps later. Employers should consider:

• Reviewing job descriptions to identify roles that currently rely on credit checks

• Eliminating credit screening for positions where there is no clear business justification

• Updating background screening policies to reflect state-specific restrictions

• Training recruiters and hiring managers to avoid improper reliance on credit data

• Coordinating with screening vendors to ensure reports align with evolving state laws

The Bigger Picture

New York’s update is a reminder that employment screening laws continue to move toward narrow, targeted use of sensitive information. Credit history is no longer a default screening tool—and employers who treat it that way face increasing risk.

In today’s regulatory environment, the safest approach is also the most practical: use credit checks sparingly, thoughtfully, and only when the job truly demands it.

 

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The foregoing content is not given as legal advice but is instead offered for informational purposes only. Fair Screen is not a law firm and therefore cannot offer legal advice. We always recommend speaking with an attorney who is knowledgeable about your company’s individual circumstances prior to making any hiring decisions or policy changes. Fair Screen makes no assurances regarding the accuracy or completeness of this content.