Could Social Media Be Used As Part Of Your Credit Score?
Lenders of credit will use this credit score in order to understand if you are a potential risk. However, it is not just financial lenders that check your credit score, other organisations such as mobile phone companies, landlords and insurance companies also do.
Traditionally, your credit score is based on your financial history; whether you have had credit before; your ability to pay it back and your repayment history. However, this looks like it might change, with lenders looking at your social media accounts to help them analysis your suitability for credit.
Who’s using it?
Although main high street banks appear to be steering clear of using social media as part of your credit score, some smaller lenders are already doing it. Currently Hamburg-based Kreditech who provide small online loans are using social media as part of their credit scoring for potential customers. Two American based companies; Movenbank an online bank and Neo a company that finances loans for first and second time car buyers are both using social media when they assess a potential customers’ request for credit.
No company seems to have gone quite as far as Hong Kong based company Lenddo, who own online loan companies in Colombia and the Philippines.
What data are they using?
Kreditech
This online lender uses Facebook as well as other social media sites in order to decide if a potential customer is likely to default on their loan. A potential customer is asked to allow access to their Facebook and other social media pages for a limited time. It would appear that Kreditch are looking at individuals associations when determining if their potential customers are a “safe” investment.
Movenbank
Movenbank is an online lender based in America. The company that launched in April of this year will be using Facebook date in order to adjust the amount of interest their customers would pay on their credit cards. The intention is to monitor Facebook messages and cut interest rates for those who “talk up” the bank to their friends. Then if any of the customers’ friends then join the bank their interest rates are cut again.
Neo
Navin Bathija, founder of Neo has found that LinkedIn is proving very useful when deciding if a customer is likely to be able to afford their repayments on their car finance. LinkedIn a popular social media platform used by professionals, helps show Neo whether ‘applicants jobs are real by looking (with permission) at the number and the nature of LinkedIn connections to co-workers.’
Lenddo
Lenddo use information from many different social networks to verify different information about an individual before deciding whether to give them a loan. According to an article published on economist.com in February this year Lenddo ask for Facebook friends to comment on applicant’s trustworthiness. However, it isn’t as easy as getting lots of Facebook “friends” to vouch for you. The company has a piece of software that will determine if they are real friends by checking for shared slang or information that suggests a closer connection.
Is this the way forward?
Is it a good idea to include social media as part of your credit score? As with everything the use of social media will help some while hindering others, but surely this would be a fairer way of determining someone’s suitability for credit?
For example, if you have two candidates both applying for a mortgage. Candidate A has no credit card debt, has a good job, saves each month and is generally someone you can trust. However, when they tried to apply for a mortgage they got refused as they have a credit score in the “poor” region. While Candidate B has no career path and moves jobs frequently, has been borrowing money for several years and currently has a mountain of debt. Candidate B credit score is good.
The reason for the difference in the credit score is that candidate A has never been able to “prove” themselves capable of managing debt, even though they save money monthly. Candidate B on the other hand has made the monthly minimum repayments therefore satisfying their commitment to the lender.
However, if Social Media was used to determine whether Candidate A or B was the better investment, the results would probably be different. If both candidates had LinkedIn profiles it would show that Candidate B moved jobs frequently and was unlikely to improve their income much above their current salary. Whereas candidate A has remained in the same job for several years and is working his way up the ladder, showing candidate A to be more focused in their work.
The use of Facebook and Twitter might show that Candidate B is out a lot spending money, they don’t have, while Candidate A is staying in. Candidates B weekend activities show that they are less cautious with money and realistically this can lead them into financial trouble.
If a lender had the full picture of an applicant including access to their social media it could paint a fairer and more rounded picture of each applicant.
Smartloan
Although at Smartloan we don’t use social media as part of our credit scoring, we do carry out the necessary checks to ensure that our loan is affordable for you. A smartloan is a short term unsecured personal loan of up to £1,000, which can be taken out between 3 to 12 months.
This article was written by Bex Evans who works for Smartloan Ltd. She writes articles on a variety of financial and SEO topics.
Posted in Social Networking.
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