Could you determine someone's creditworthiness by his or her looks?
Today I read about an interesting study done by Rice University on the correlation between trustworthiness and looks. The researchers utilized the popular peer to peer lending site Prosper.com and Amazon's Mechanic Turk. Prosper is a site that allows borrowers to submit a loan application along with personal details and a picture. The researchers took the pictures off over 6000 of these applications and showed them to 25 individuals through Amazon.com's Mechanic Turk and asked these workers to rank the creditworthiness of the people in the Prosper pictures. The results show quite a few startling correlations between looks and creditworthiness.
First, the 25 Mechanic Turk workers' perceived trustworthiness of the photographs they saw actually correlated with the credit scores of these borrowers. This means that the workers somehow instinctually distinguished people's credit simply based on the photographs. Those who were deemed untrustworthy had to pay interest rates that were on average 1.82% higher than the rates paid by those who were deemed trustworthy. Additionally, they found that the people who were ranked as trustworthy actually defaulted less often on their Prosper loans.
This experiment is interesting because it shows that humans are able to correctly place trust to some extent just based on the looks of others. This makes sense to me because in the past you had to actually go to a bank and meet with someone face to face to open an account or take out a loan. Now many loans and credit applications are done online and perhaps the human interaction that is lost may be a factor that contributes to higher default rates.
The research also shows that many lenders do care about the picture posted on Prosper by borrowers. So the tip here for borrowers is to post a picture where you look as trustworthy as possible. Perhaps a good way to gauge your own trustworthiness is to hire 25 people on Amazon's MTurk and pay them a few cents each to rate your picture just like the researchers did. It might be a good investment if you want a large loan to close at a good rate.
Finally, the research paper by Jefferson Duarte, Stephan Siegel, and Lance A. Young is titled Trust and Credit, and it is available here. The actual paper contains quite a bit of statistics, but unfortunately it does not tell you how to make yourself look more trustworthy.
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