The next evolution in credit scoring may be around the corner — and it might include your social media profile.
Lenddo: Linking Social Media to Loan Applications
While social media isn’t used too widely in the United States right now when it comes to making loan decisions, it’s becoming a big deal in some developing countries, like the Philippines. One startup, Lenddo, uses social media networks as part of the loan application.
Lenddo asks you to submit your social media accounts when you apply for a loan. The length of time the accounts have been active, as well as the number of friends and followers borrower have, are all used as part of the algorithm.
On top of that, if you miss a payment, your social network is notified. Lenddo hopes that this public shaming could prevent defaults in countries where an emerging middle class is interested in taking advantage of credit.
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Other Companies Looking at Social Media Profiles
There are other companies that want to use social media information when making decisions about your loan, according to Slate.com. Wonga, a company based in London, goes so far as to use the time of day — and the way a loan applicant uses the web site — in determining whether or not to grant approval. Kreditech, a German company, wants to providing a scoring service that includes online behavioral analytics, GPS data, and the social graph. Additionally, there is even a startup in the United States, LendUp, which makes use of social media activity to match the information applicants give with what is happening on Twitter and Facebook.
U.S. Banks and Social Media Profiles
While most of these efforts are outside the United States, they could soon be seen at a financial institution near you. American Banker reports that financial institutions know that consumer data found on social media networks imply certain things about financial habits. One company, MovenBank, plans to use information on Facebook and Twitter to see whether or not your habits check out.
It’s possible to glean information about you from what you post online. When you post about a shopping spree, that could be seen by a wary lender. What about who you’re friends with? That could matter as well. If all your friends are spendy, it could be an indicator that you are as well. And that could translate into the perception that you are a poor credit risk.
Big data is providing all sorts of information to all sorts of companies. There is a very real possibility that what you do on social media could soon affect the way potential lenders view you — and impact your credit.