How asking for a loan is a lot like asking someone on a date.
Whether you realize it or not, asking for a loan can be a little like asking someone out on a date.
The moment a person is asked on a date, he or she obviously sizes up their prospective partner. Few people would say, “Yes, let’s go on a date,” if they didn’t think there was something positive about the person doing the asking.
Lenders are the same way. They’re going to size you up, and if they don’t like what they see, you’re going to be told in a cold Dear John letter that it’s you and not them (lenders don’t exactly let you down easy).
And while the credit score and credit history are the most important reasons why a lender, or its computer algorithm, will accept or reject you, there’s another, often forgotten, factor that can come into play: consumer behavior. It might be helpful the next time you’re in the market for a loan to remember that. Because, yes, your lender is judging you.
Lenders find it a turnoff when a borrower is in stress. Joshua Weiss is the CEO of TeliApp, a software company that is currently integrating and testing their artificial intelligence engine, Draconis, with two banks. Draconis, Weiss says, “detects and analyzes trends and predicts human behavior.”
You may want to borrow money to reduce your stress, but your stress is what stresses out lenders, according to Weiss.
Banks want to obviously predict which consumers are safer lending risks, Weiss says, adding: “These predictions are done based on their purchasing habits. Not just what they bought, but rather when they purchase the products, where they were when the purchases were made, what succession were the purchases made, there are dozens of valuable data points that, when analyzed, can tell us a lot about a person and their habits; not only purchasing, but even general likes and dislikes.”
So if you are under stress, and especially if you know you’re going to be applying for a loan in the near future, try to stay under the radar. In other words, go exercise. See a movie. Do something to ease your stress that a lender can’t criticize you for. If you’re going to take out a home equity line of credit or ask to have the credit line on your credit card raised in the near future, so you have extra financial padding, you probably don’t want to use your credit card at a handful of casinos and bars. Not that there’s anything wrong with either activity, but if you never go to a casinos and bars, and you suddenly do before taking out an expensive loan, a lender who learns of those activities could connect the dots and make some unhelpful conclusions.
You can scare lenders off by looking like you’re stretching yourself too thin. Generally, a lender won’t know if you’re on the verge of a divorce or in the middle of a court case in which you could lose your shirt, but if they find out, that can be a good reason to reject a loan.