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Using social data to determine creditworthiness??

Posted by on Aug. 28, 2013 at 9:08 AM
  • 68 Replies

Your Facebook Friends May Lower Your Credit Score

by Linda Sharps

Facebook credit scoreYour Facebook profile reveals plenty of data about you -- what you look like, where you live, what your interests and hobbies are, and maybe even your sexual orientation and political leanings. That's a lot of personal information available just from one social media platform, and according to some financial lending companies, there's something else that can be determined from your Facebook account: your credit risk.

It sounds almost too creepy to be true, but a number of tech startups are now using social data to determine the risk of providing loans. While traditional lenders rely heavily on credit scores like FICO, new companies are looking at Facebook and other social networks to decide whether applicants can be trusted to pay back borrowed money.

Lenddo is one company that says it "helps members engage their social network to establish credibility and gain easy access to financial services." The company uses its own capital to provide applicants with loans that can be can be used for education, medical emergencies, home improvement, and "other life-improving purposes," and they believe that a person's social connections are a strong indicator of their creditworthiness.

According to Lenddo's CEO,

It turns out humans are really good at knowing who is trustworthy and reliable in their community. What's new is that we're now able to measure through massive computing power.

That "massive computing power" can figure out whether you're Facebook friends with someone who was late paying back a Lenddo loan -- and your score drops even lower if that person is someone you frequently interact with. Can you even imagine? I mean, how is that a reliable way of determining whether or not you're a good bet for a lender? Does being "trustworthy and reliable" always equate to making payments on time? How crappy would it be if suspecting that a friend might be a little delinquent in repaying their loan started influencing your decision to connect with them online?

The bottom line is that for most people who are looking for a loan, lenders will base their decision on the data included in a FICO score: your payment history, the amounts you've owed, the length of your credit history, and the types of credit you've used.

For people without credit history, however, making reasonably priced capital accessible is a great thing -- and I'm sure most applicants would be happy to have their social data and online behavior evaluated if it meant getting a much-needed loan. I can't help but think of this as a disturbing trend, though. What if there comes a day when everyone's credit score is affected by their social network? Will we eventually have to unfriend people if we think they're having trouble paying the bills? Honestly, I don't think online reputations really translate to real-world financial trustworthiness in any meaningful way, and it seems dangerous to start making that assumption.

What do you think of the trend of using social data to determine creditworthiness?

by on Aug. 28, 2013 at 9:08 AM
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Replies (1-10):
by Gold Member on Aug. 28, 2013 at 9:14 AM
I don't think thats very reliable. Just because you're friends with someone who couldn't at one point pay back a loan doesn't mean that you won't.
by LMAO on Aug. 28, 2013 at 9:35 AM

I don't agree with it. 

by Anonymous 2 on Aug. 28, 2013 at 9:42 AM

I don't agree with it but in a way it makessense. People like to be around others who are like them and if you have a couple of friends that you talk to often and they don't pay their bills or if they've never missed a payment on anything then you are likely to be the same time of person they are.
There are always exceptions which is why I don't agree with it. Decisions for one person shouldn't be made because of the actions of another but it happens every day in many different ways.  

by on Aug. 28, 2013 at 9:44 AM

I have no problem with that. 

It's their money, they should be able to lend it to whoever they want. 

by Anonymous 3 on Aug. 28, 2013 at 9:45 AM
2 moms liked this

I think it's not very smart to put all that about yourself on ridiculous social media accounts in the first place.  What you do online says a lot about you.  I wouldn't risk a lot of money or a job on someone who makes tons of posts about drinking, sleeping around, political views or any of the loads of other questionable things people post daily.

by Anonymous 4 on Aug. 28, 2013 at 9:47 AM
1 mom liked this
I guess before you friend someone you should look at their credit?

by Anonymous 5 on Aug. 28, 2013 at 9:53 AM
3 moms liked this

I don't agree with it but I am aware that it is a reality. I have been on my husband about this very subject. It is one of the reasons I do not participate on any social media other than Cafemom. I do not post pics online and I don't put my business out on display. Even on here, I participate mostly anon. Not that I have anything sinister to hide, but unfortunately social media has the ability to paint you in a bad color sometimes if you're not careful. I am an extremely cautious person and try not to put myself out there too much. I don't desire any financial institution looking up my profiles to determine whether or not I'm a good candidate for a loan or credit card. And I certainly do not want an employer I have applied to judging me on my photos and online persona. I just don't engage with social media much and I plan to stay that way. Cafemom is my only outlet online. :-p If I want to contact a friend, I call or text them.

by Kate on Aug. 28, 2013 at 9:54 AM
No I think that's ridiculous. Just because a close friend fell on hard times and defaulted on a loan doesn't mean that my family doesn't have good jobs and that we don't pay our bills on time.
by Anonymous 6 on Aug. 28, 2013 at 9:54 AM
I hope they don't start doing this. We have excellent credit and worked very hard to make sure we paid our bills on time,never taking on more bills then we could handle (even if something happens to one of us), ect.

My bff however doesn't and is always late making payments and almost has more bills then she can pay, she's always borrowing money from someone. (one of those people that has to have the best house, new cars, new phones, new everything) If anything happened and she got laid off or whatever, she would probably loss everything fast.

I have several family members on Facebook that I definitely wouldn't want their credit history determining my credit.
by Anonymous 7 on Aug. 28, 2013 at 9:55 AM

I have friends on my fb that I rarely associate with in real life (as in I haven't talked to them in 2-3 years), but they post tons of cute animal pics that I "like" does that mean I am close to them? No, it means I like cute pics of puppies.  Also I have friends on fb that I have met in my travels.  I guess they must have good enough credit to be able to vacation overseas but that is not always the case. 

How many people do you need to purge off your friends list?

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