Late Payments and Leery Applicants: Credit Checks as a Selection Test
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The use of pre-employment credit checks has grown dramatically in the U.S. in recent years, but there has been almost no research on their validity from a selection standpoint and none on how applicants respond to them. We examine the use of credit checks as a selection test, reviewing evidence for their validity and legal considerations. The theoretical part of the article highlights how credit checks are distinct in key respects from more commonly studied selection tests and how they are likely to violate many applicants’ expectations of privacy and procedural justice. The empirical section presents the results of a study of business undergraduates. Consistent with hypotheses, results indicate negative reactions to the use of credit reports in hiring, moderated by job and individual characteristics, and substantial misunderstanding of what credit reports contain. Implications for practice are discussed.
Key wordsselection privacy attitudes organizational justice credit history
We would like to thank John Cullen and Charles Funk for assistance with subject recruitment.
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