Here is the raw data for the counts of each type of loan broken down by credit grade and DTI buckets:

Although there cannot be any real concrete conclusions drawn from this analysis, due to the low number of loans thus far, I think it is safe to say that there is a general increase in default rates as one’s DTI increases. This increase in default rate is even more visible as credit grades get lower and lower. It is also interesting to note that rarely does the default rates of one credit grade overlap with that of another (based on the graph above with the maximum DTI being 59.55%). This means that more attention or weight should be given to credit instead of the borrower’s DTI.

You may also be interested in reading the following posts:

• Taking into account the Prosper fees and net default rates, which credit grade will have the highest return of investment (ROI)?
• What interest rate should I use when bidding on a loan?
• How much money should I bid on Prosper loans?

Glossary for status of loans:

• Defaulted – The loan defaulted
• Paid In Full – The load was paid in full
• Repurchased – The loan was repurchased by Prosper

If you have any comments or suggestions to add to this list, please feel free to comment below.

• Endorsements from Friends – These are recommendations made by other members of the Prosper community that give credibility to the borrower. There are several different types of endorsements and they can be identified by these icons:
  
  If the identity of the endorser has not been identified yet by Prosper.com, then the first icon will appear in the listing. If the borrower is part of a group and receives an endorsement from the group leader, the second icon will be displayed. If an endorser actually bids on the listing, you will see the third icon with the dollar amount of the bid. The best types of endorsements consist of the following:
  1. Friends or Prosper members who have actually placed a bid on the listing. This not only gives credibility to the endorsement but it also shows the confidence that they have in the borrower.
  2. A personal photo of the endorser is always a plus.

  Endorsements will also drive the borrowers to pay on time because if they are late on their payments, the endorsers them will receive an email notice of that.

• Clean history – This probably does not need to be reiterated but borrowers who have 0 delinquencies tend to stay that way. These people understand the importance of having a good credit score and have clearly shown their ability to maintain a clean record. I have started to accumulate some data regarding the loans that are late and the one common theme is that most of them have been delinquent in the past.
• It’s all in the Description – OK, that might be an exaggeration but it can definitely give an indication. On looking back at the 2 loans I have that are 4+ months default, I noticed one obvious thing they had in common:
  
  The borrowers did not bother to write the purpose of their loans or their financial situations. I’m not sure if they were just lazy or had something to hide, but this should definitely draw up a red flag. This situation is analogous to receiving someone’s resume and noticing that the skills or experience section is blank or missing. Looking back now, I can not believe at the dumb mistakes I have made when I started out. This is also the type of thing that you cannot filter for in a standing order or a portfolio plan and this is exactly why I choose all my loans by eye.
• Going, going, gone – Bidding on Prosper is very similar to bidding on eBay: most of the activity happens in the last couple of hours. I recommend bidding during the last couple of hours of a listing instead of a listing that is still opened for 7 days. The reason being that your money will be tied up for 7 days doing absolutely nothing. You mind as well have placed a bid on a listing that was ending soon so that you can start earning interest as soon as possible. Time is money and in the long run, this will have a huge impact.
• Loan amount < $10,000 All Prosper loans have a 3-year term. This short duration equates to higher monthly payments that could overburden borrowers who are used to long-term loans.
• Percent funding – Do not waste your time and money on listings that are not funded. I usually look for at least 90% funding before I start to bid because these listings have the best chance of becoming a loan. Here is a tip for the busy or the lazy: make other bidders do all the work and look for and bid on listings that have 100% funding. This can save some time and also serves to weed out risky loans.
• Personal photos – Listings with actual photos of the borrower tend to be more personal. Not only are they willing to put their face out there, but this shows some sort of commitment. With their faces out there on the net, these people tend not to default as often as those utilizing the default icons.
• HR credit grade = bad – Do not risk your money with HR listings. The return is extremely low and risky. In fact, HR listings have the worst returns.
• Credit Inquiries in the last 6 months – I would stay between 0-3 inquiries within the last 6 months. If the number is greater, you are putting your money at risk.

You may also be interested in reading the following posts:

• Default Rates broken down by Credit Grade and DTI Buckets
• Taking into account the Prosper fees and net default rates, which credit grade will have the highest return of investment (ROI)?
• What interest rate should I use when bidding on a loan?
• How much money should I bid on Prosper loans?

If you have any comments or suggestions to add to this list, please feel free to comment below.

Update: Please note that all Prosper loans are 3-year terms and Prosper has only been around since February of 2006. This means that there is not enough data to in giving accurate default rates based on the historical performance of Prosper loans. Prosper is still young and needs to mature in order to obtain accurate statistics. Right now, we can only extrapolate and predict with the limited amount of data that we have.

The default rate is the Experian historical average by credit grade for borrowers with debt to income ratios of 20% or less. The average lender rate is derived from all Prosper loans between the dates of 6/1/2006 to 9/20/2007.

The default rate is from Prosper loans between the 6/1/2006 to 9/20/2007. The average lender rate is derived from all Prosper loans between the dates of 6/1/2006 to 9/20/2007.

According to the second table, loans from borrowers with a D or E credit rating will have the highest ROI. Please note that if you plan on bidding on these types of loans, you should always use the minimum bid and have a large portfolio (or at least plan to have one). These 2 credit grades make up the majority of my portfolio and I am currently seeing some very nice returns. Another clear message from these 2 tables is to stay clear from bidding on borrowers with an HR rating. It is extremely risky with very low returns.

One interesting note from these 2 tables is the difference in default rates. The default rates on Prosper loans is consistently higher across the board for all credit grades. After thinking about this a bit, I think that it makes a lot of sense. Borrowers who are looking for loans will usually use traditional methods such as applying for credit cards or loans from banks. Many of the Prosper listings could have been from people who were initially rejected using traditional methods so that can explain the higher default rates. Of course, I am not a professional credit analyst but that is my 2 cents.

One anomaly that you might have noticed is the spike in default rate for the C credit grade borrowers in the second table. I do not know how to explain this but it might have something to do with how Prosper assigns these credit grades.

The breakdown is as follows:

You may also be interested in reading the following posts:

• Default Rates broken down by Credit Grade and DTI Buckets
• How do I choose a Prosper loan to fund?
• What interest rate should I use when bidding on a loan?
• How much money should I bid on Prosper loans?

Update: Prosper now has a risk calculator that will estimate your earnings based on the historical performance of similar listings in the past when making your bid. I highly recommend utilizing this tool when bidding as it is more accurate.

You may also be interested in reading the following posts:

• Default Rates broken down by Credit Grade and DTI Buckets
• How do I choose a Prosper loan to fund?
• Taking into account the Prosper fees and net default rates, which credit grade will have the highest return of investment (ROI)?
• How much money should I bid on Prosper loans?

If you have a large sum of money to invest, then maybe I would go with $100 per bid as it is all relative after all. The key is to diversify your portfolio.

You may also be interested in reading the following posts:

• Default Rates broken down by Credit Grade and DTI Buckets
• How do I choose a Prosper loan to fund?
• Taking into account the Prosper fees and net default rates, which credit grade will have the highest return of investment (ROI)?
• What interest rate should I use when bidding on a loan?