Understanding Applicant Reactions to Credit Checks: Uncertainty, information effects and individual differences

Abstract

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.

An empirical investigation of dispositional antecedents and performance-related outcomes of credit scores.

“…By systematically investigating the dispositional antecedents and the predictive power of a widely used screening tool that has received virtually no attention in the management or applied psychology literatures, this study contributes to scientific understanding while answering calls from practitioners, academic researchers, and government officials (Gallagher, 2006;Kuhn & Nielsen, 2008;Morris, McDaniel, Worst, & Timm, 1995;Palmer & Koppes, 2004;Smith, 2007) who have expressed serious concerns about the legitimacy of using credit scores for screening purposes.…”

Selecting the Good vs. Rejecting the Bad: Regulatory Focus Effects on Staffing Decision Making

“…Of particular concern is the inaccuracy of much credit report information, and the difficulty individuals can experience attempting to correct errors. Moreover, even applicants with good credit histories may resent credit checks as an invasion of privacy (Kuhn & Nielsen, ; Nielsen & Kuhn, ), and several states have recently passed legislation restricting credit checks for employment purposes.…”

“…By definition there is more uncertainty associated with "potential" than with a tangible achievement, and a strong promotion focus will incline evaluators to place greater weight on imagined extreme outcomes on errors. Moreover, even applicants with good credit histories may resent credit checks as an invasion of privacy (Kuhn & Nielsen, 2008;Nielsen & Kuhn, 2009), and several states have recently passed legislation restricting credit checks for employment purposes.…”

“…A quote from an HR executive aptly illustrates the desire to avoid blame as a motivation to perform credit checks: “I'd rather be in the position of not hiring someone because of what I found than having to explain why I did, and they did something wrong” (quoted in Sandberg, ). Preemployment credit checks were relatively rare as recently as the 1990s, but are now commonplace for a wide variety of jobs, a proliferation that took place in the absence of any published evidence of the validity of credit checks for employment purposes (Kuhn & Nielsen, ). Although there certainly are legitimate reasons to review credit reports for many jobs, there are potential costs to using this procedure.…”

Demographic Variables and Credit Scores: An empirical study of a controversial selection tool

“…F or years, applicants have been subjected to a host of selection procedures including cognitive ability tests, personality tests, interviews, etc., yet current trends show one alternative selection tool is gaining significant momentum: applicant credit reports (Kuhn & Nielsen, 2008;Oppler, Lyons, Ricks, & Oppler, 2008). 1 Recent research conducted by the Society for Human Resource Management (2010) indicates over half of the employers surveyed currently conduct credit background checks on some or all applicants.This trend is also documented by a national survey of retailers who report credit checks show the largest planned increase usage during upcoming years (Hollinger & Adams, 2008).…”