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.

Credit checks are an increasingly common selection procedure for American jobs, and they are distinct in a number of ways from the selection tests typically studied by researchers. With a credit check, applicants do not actually take a test or answer questions, and most will be uncertain about what information a credit report contains, why one is being requested, and how it will be evaluated. In two experiments we assess the effects of explanations and individual differences. Experiment 1 used a sample of 408 undergraduate business students to examine reaction dimensions relevant to credit checks, and found perceptions to be mainly negative. The type of explanation read, however, interacted with perceived credit report impact to influence reactions. Results of Experiment 2, with a sample of students from a more non-traditional population, were similar, but age was associated with greater skepticism of credit report accuracy. Privacy perceptions were the strongest predictor of intention to withdraw from the selection process.

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