Love & Loans: The Effect of Beauty and Personal Characteristics in Credit Markets
70 Pages Posted: 6 Mar 2008 Last revised: 9 Feb 2013
Date Written: November 22, 2012
I find that beauty, race, age, and personal characteristics affect lenders' decisions, once credit and employment history, homeownership, and other hard financial information are taken into account. Beautiful applicants have 1.59% higher probability of getting loans, pay 60bps less, but have similar default rates than average looking borrowers who get worse terms. Blacks are less likely to get loans, pay higher rates than similar Whites, but default more. The findings are consistent with taste-based discrimination/misperception against the ugly, and with statistical discrimination against Blacks, although lenders specialization in borrowers from the same ethnicity and racial prejudice also play a role.
Keywords: Beauty, Credit Markets, Discrimination
JEL Classification: G20, D10, J71
Suggested Citation: Suggested Citation