How Should You Dress For Your Loan Application?

Apparently, looks matter when you’re seeking a loan.  From a Rice University study:

People who are perceived to be trustworthy are more likely to have a higher credit score and pay lower interest rates on loans, and are less likely to default, according to the study by Rice University in Houston, Texas.

Even when hard facts such as credit scores are available, people rely on an assessment of trustworthiness to decide whether to make a loan.

I’ll admit that I am not immune to this bias.  Much of my business is local and I “pre-judge” the intent if not the credit worthiness on the effort put forth.  Let me give you an example.  Two (different)  people made appointments, the day after Thanksgiving, 2008, to go through a pre-qualification.  Both needed counseling about how to pay down debt and improve their credit scores so that they could buy a home.

The first, an accomplished young man, arrived in like he was headed to the beach; shorts, T-shirt and flip-flops.  While this is the “standard uniform” of a San Diegan on his day off, his documentation reflected his cavalier dress.  We met for 45 minutes, outlined what he could do to prepare for home ownership, and concluded the meeting with a promise to “touch base” after the first of the year.  His dress, behavior, and attitude was “What can you for for me?” I didn’t take his inquiry seriously.

The second, an equally accomplished young lady, came to the appointment dressed to do business.  Her dress, while casual, reflected her solemnity and determination.  She read my article about how to prepare documentation, opened up a notebook, and took copious notes.  Within 30 minutes, we developed a detailed budget and a plan to pay down debt while saving for a down payment.  She requested three follow-up phone calls to gauge her progress towards her goal.  Her dress, behavior, and attitude is “How can you help me to help myself?”.  Obviously, she got me to “buy in” to her.

How might a borrower do this online? Borrowers would do well to understand that a loan originator is “interviewing” you as much as you are “interviewing” them.  I have been persuaded to take on difficult, time-consuming, loan transactions because I felt a sense of mutual respect from my discourse with the borrower.  Borrowers who referenced an online profile, where I could see their picture and resume, received 2-3 times the attention as those who didn’t.

Sounds unfair, doesn’t it? The Zillow Mortgage Marketplace would seemingly eliminate such subjectivity and democratize a borrower’s chances for the best loan terms.  I won’t argue against its efficacy for the “pristine” borrower.  Pristine, however, is becoming subjective as valuations decline rapidly.  Your “numbers” might not be enough to attract the most talented mortgage consultants in the country but… your picture might help.  From the aforementioned Rice University study:

“There is an array of information that you can get out of the pictures,” Duarte said, adding that Prosper.com borrowers use photographs ranging from family portraits to snapshots of their pets.

“The pictures are revealing something about the behaviour of these people that is not taken into account in the credit score model,” Duarte said.

To make sure that the evaluators’ prejudices did not skew the results, the researchers controlled for race, age, gender, obesity, attractiveness and education, as well as financial factors like employment status, income and homeownership.

Understanding what determines trustworthiness may be relevant to the current economic crisis and be the key in restoring trust in the markets, Duarte said.

Trust.   It’s the cornerstone to a healthy banking system. If “old skool” is now vogue,  pay heed to your grandfather’s advice; wear a tie to your loan applcation.  Online, a profile picture is your tie.

If your face is trustworthy, why hide it?