Test scores on the Test of Basic Concepts, a school readiness test, were compared with actual performance in school for 186 low-scoring and 133 high-scoring groups of first graders from Spain at the beginning of the school year to explore the issues of competence testing and prediction of performance. The measure of school performance was derived from teacher evaluations at the end of the school year. Data were analyzed in terms of: (1) validity of the decisions based on both validity coefficients and correct classifications; (2) fairness of the classifications; and (3) the meaning and impact of overpredictions and underpredictions. In every analysis, predictor test scores, when used for selection, favored high-scoring groups and individuals. The findings are supported by an analysis of the regression line. Implications of the findings for test use in selecting applicants or for determining competence are discussed. Three tables and one graph present study data. There are 13 references. (SLD)