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Facebook and Your Credit

Wondering what Facebook has to do with your credit score? Believe it or not, some new companies are beginning to use social data to help them make decisions about lending to people have not established credit yet. Rather than automatically rejecting those without credit, some business owners feel that social media – specifically, the friends you hang out with online – can be a good indicator of your creditworthiness.

The company Lenddo, for example, eschews loan applicants who have Facebook friends who defaulted on a Lenddo loan, especially if the applicant interacts with those friends frequently. Another company, Kreditech, uses numerous data points when assessing a loan applicant – for example, social media profiles and accounts, the way the applicant fills out the applications online (for example, all or no caps hurt a person’s chances), and whether the applicant’s computer is located in the same place where the applicant claims to live and work.

The many individual data points may not seem significant when examined individually, but combined, they paint a reasonably accurate picture of the applicant. Companies like these that use social media as an indicator of an applicant’s level of financial responsibility target a certain subset of borrowers, such as small businesses and middle-class individuals.

Some financial experts are skeptical. Opponents of this method say that online behaviour and social data are not good indicators of whether a person will pay back a loan. It is also not as dependable as a credit report, since users of social media are able to control their number (and quality) of Facebook friends, opening up the potential for fooling the system. This represents a level of control that individuals do not have with their credit reports, meaning that for now, the credit report is still the go-to resource that companies use to size you up as a borrower.