Think you have a good B.S. detector? Well, let’s find out. Fascinating research in New York Magazine article (Hat tip to Big Picture Blog) describes how researchers used Big Data techniques to comb through information provided by borrowers on a peer-to-peer lending site. The goal of their analysis: look for words that might predict whether or not a borrower might make good on a loan. They determined that five words were good predictors that a loan would be paid and five words were good predictors that a loan would NOT be repaid.

For the ten key words they identified, can you guess which five predict repayment and which five predict default? 

• God
• promise
• debt-free
• minimum payment
• lower interest rate
• will pay
• graduate
• thank you
• after-tax
• hospital

You have to read the article to get all the answers, but here is how they summarized their research:

In sum, according to these researchers, giving a detailed plan of how he can make his payments and mentioning commitments he has kept in the past are evidence someone will pay back a loan. Making promises and appealing to your mercy is a clear sign someone will go into default. Regardless of the reasons—or what it tells us about human nature that making promises is a sure sign someone will, in actuality, not do something—the scholars found the test was an extremely valuable piece of information in predicting default. Someone who mentions God was 2.2 times more likely to default. This was among the single highest indicators that someone would not pay back.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.