A fascinating study suggests that the average person can estimate a stranger's creditworthiness simply by looking at a picture of a face. As The Economist reports, Professor Jefferson Duarte of Rice University had study participants rate how trustworthy people appeared in photographs and then estimate the percentage probability that each individual would
repay a $100 loan. The researchers then looked at 6,821 loan applications, 733 of which were
successful and found that the assessments of
trustworthiness, and of likelihood to repay a loan, correlated with potential borrowers’
credit ratings based on their credit history.
From the study's abstract:
requests filled, even controlling for physical attractiveness, detailed
demographic information, credit profile, income, education, employment
and loan-specific information. Indeed, in order to have the same
probability of being funded as a borrower perceived as trustworthy, a
borrower who is perceived as untrustworthy must pay a promised interest
rate that is 182 basis points higher.
Fascinating, isn't it? Perhaps we should build some image-capture functionality into our Credit Score Compass!
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This is very true, I sell manufactured housing and if you fall into the less trustworthy area, you will pay points up front. You will also get hit with a higher rate and then they will even charge preditory lending points from the sellers proceeds.
I really wish more people would take this into account when going into setting up a loan for a major purchase like a mortgage loan for a home.
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