Your job pays the bills — but your job title might make those bills bigger.
Some lenders offering personal loans look at customers’ occupations when evaluating potential borrowers and setting interest rates. Credit, income and debt matter more, but your job gives lenders clues about your borrowing habits.
Lenders examine data about jobs
Lenders check that your reported income matches your occupation’s typical salary. A schoolteacher with a six-figure salary will raise a red flag, for example.
Some lenders also use the data to predict risk of default, which influences interest rate. They’ve identified high-level trends:
Doctors are high earners with busy schedules. Translation: They’re sometimes late but eventually make good, says Todd Nelson, director of business development at online lender LightStream.
Engineers and dentists are statistically more likely to repay loans on time than lawyers or accountants, though all are relatively highly paid, says Paul Gu, co-founder of online lender Upstart.
Nurses and electricians are 7% less likely to default than those in other occupations, Gu says. Those with the job title “analyst” are also statistically less likely to default. Thirty-two percent of analysts who borrowed from online lender Prosper had a prior 60-day delinquency on their credit report, compared with 35% in other occupations, according to data provided by NSR Invest.
And the unsteady incomes of salespeople and small business owners make them riskier customers, lenders say. Salespeople who took loans from Prosper had a prior 60-day delinquency rate of 38%, higher than other occupations, according to the NSR data.
Sometimes, lenders just aren’t willing to take the risk.
Can’t change jobs? You can still lower your bills
Switching jobs might not be in the cards, but there are other steps you can take to trim costs:
Check your credit score and reports and fix any errors. Pay your bills on time; don’t use more than 30% of your limit on any one credit card.
Reduce debt. A lower debt-to-income ratio looks good to lenders.
Pre-qualify for loans with multiple lenders. Doing so will let you compare rates and terms without impacting your credit score.