Bros Don’t Let Bros Lend Money

Will pleasant chit-chat with a bank loan officer get you the money you want, or is your borrowing destiny tied only to hard numbers such as your debt-to-income ratio?

That may depend on your gender—and your loan officer’s gender. If you’re both men, then mentioning your hobbies, your neighborhood, your kids—otherwise known as “soft” information—does have an impact. But it turns out that your bro across the desk who pledged the same frat and likes the same bars may eventually rue the day he met you.

Some studies suggest collection of qualitative (soft) information from borrowers about such things as family, friends, and other personal and hard-to-verify tidbits helps reduce the odds of loan default. But it can also backfire, according to the authors of “Making Sense of Soft Information: Interpretation Bias and Ex-Post Lending Outcomes.”

The paper1491596150802 found that “hard” information such as credit scores and debt-to-income levels was interpreted the same way by male and female loan officers. Interpretations diverged, though, when softer information came into the picture, and when the borrower and lender were both male. In that case, the outcome of loans was measurably worse.

Two years after the loans tracked by the study were originated, data showed the credit outcomes of loans made by men to men, in which soft information was noted, were worse than for women. The outcome, measured by events that include charge-offs and defaults, was 12 percent worse for male borrowers than for women.