Featured Research

from universities, journals, and other organizations

Your Looks, Creditworthiness May Go Hand In Hand, At Least In The Eyes Of Some Lenders

Date:
March 15, 2009
Source:
Rice University
Summary:
New research suggests that a person's appearance may play a role in whether they are deemed trustworthy by financial lenders.

New research suggests that a person’s appearance may play a role in whether they are deemed trustworthy by financial lenders.
Credit: Image courtesy of Rice University

New research suggests that a person’s appearance may play a role in whether they are deemed trustworthy by financial lenders. The study is summarized in a working paper by Jefferson Duarte at Rice University’s Jones Graduate School of Management and Stephan Siegel and Lance Young, both of the University of Washington.

The paper, “Trust and Credit,” found that borrowers on the peer-to-peer lending site Prosper.com who are perceived as trustworthy are more likely to have their loan requests granted. The research revealed that a seemingly untrustworthy person must promise to pay an interest rate almost 2 percent higher than those deemed trustworthy to have the same chance of getting a loan.

“We found that people take into account someone’s appearance when engaging in commercial transactions -- even in situations where a lot of information about the parties involved is available,” said Duarte, visiting associate professor in management at Rice.

Using Prosper.com loan data

Duarte and his colleagues looked at 6,821 loan applications submitted to the popular online peer-to-peer lending site Prosper.com, where people seeking loans are matched up with people willing to lend money. At Prosper.com, borrowers submit information such as their credit profile, job history, education level and income along with terms of a loan they wish to obtain. The borrowers may also supply photographs and a statement about why they are seeking a loan or its intended use. At that point, lenders look at the borrowers’ profiles. If lenders are interested in offering the borrower a loan, they place a bid for their business. If there are enough bids, the loan application is filled; otherwise, the loan application expires. Of the 6,821 applications used by the researchers, 733 became loans.

The researchers then turned to Amazon.com's Mechanical Turk (MTurk), a site that brings together people who need a task done with people seeking work. The research team supplied 25 MTurk “workers” with only the photographs of the borrowers and asked them to rate the borrowers' trustworthiness on a scale of 1 to 5. They were also asked to assess the probability that the person in the photograph would repay a $100 loan. With these responses, the researchers built a measure of trustworthiness based on the photographs.

Armed with the physiognomy-based trustworthiness measures, the team found that perceived trustworthiness of borrowers correlates with the ratings on their credit history filed at Prosper.com. That is, the MTurk workers could distinguish people with high credit scores from people with low credit scores based solely on the photographs.

The researchers also found that people perceived as trustworthy default on their loans less often, even after accounting for credit scores. "This implies that the pictures revealed something about borrower creditworthiness that is not accounted for in traditional credit scoring models," Duarte said.

Another finding: Lenders on Prosper.com use the information in the picture when deciding to make a loan -- even with all the information that is available about the borrower's credit history. People perceived as trustworthy get loans more often, even after accounting for traditional creditworthiness measures, such as credit scores.


Story Source:

The above story is based on materials provided by Rice University. Note: Materials may be edited for content and length.


Cite This Page:

Rice University. "Your Looks, Creditworthiness May Go Hand In Hand, At Least In The Eyes Of Some Lenders." ScienceDaily. ScienceDaily, 15 March 2009. <www.sciencedaily.com/releases/2009/03/090312130655.htm>.
Rice University. (2009, March 15). Your Looks, Creditworthiness May Go Hand In Hand, At Least In The Eyes Of Some Lenders. ScienceDaily. Retrieved October 20, 2014 from www.sciencedaily.com/releases/2009/03/090312130655.htm
Rice University. "Your Looks, Creditworthiness May Go Hand In Hand, At Least In The Eyes Of Some Lenders." ScienceDaily. www.sciencedaily.com/releases/2009/03/090312130655.htm (accessed October 20, 2014).

Share This



More Mind & Brain News

Monday, October 20, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Your Birth Season Might Determine Your Temperament

Your Birth Season Might Determine Your Temperament

Newsy (Oct. 20, 2014) A new study says the season you're born in can determine your temperament — and one season has a surprising outcome. Video provided by Newsy
Powered by NewsLook.com
Court Ruling Means Kids' Online Activity Could Be On Parents

Court Ruling Means Kids' Online Activity Could Be On Parents

Newsy (Oct. 17, 2014) In a ruling attorneys for both sides agreed was a first of its kind, a Georgia appeals court said parents can be held liable for what kids put online. Video provided by Newsy
Powered by NewsLook.com
The Best Foods To Boost Your Mood

The Best Foods To Boost Your Mood

Buzz60 (Oct. 17, 2014) Feeling down? Reach for the refrigerator, not the medicine cabinet! TC Newman (@PurpleTCNewman) shares some of the best foods to boost your mood. Video provided by Buzz60
Powered by NewsLook.com
You Can Get Addicted To Google Glass, Apparently

You Can Get Addicted To Google Glass, Apparently

Newsy (Oct. 15, 2014) Researchers claim they’ve diagnosed the first example of the disorder in a 31-year-old U.S. Navy serviceman. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Health & Medicine

Mind & Brain

Living & Well

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins