Are you looking for a new credit card, or finance on a car? Perhaps you’re taking that first step with a mortgage, or simply want a loan from your bank towards an amazing holiday.
Well, let’s hope your social media behaviour is in good standing, as more and more lending companies are using Facebook, Twitter and other social networks to determine the creditworthiness of a borrower before they make a decision.
What are they looking for? Consistency, for one. Lenders might check to see if the job you say you have on your loan application matches what is on your LinkedIn profile. Or they might see what you’re saying on Twitter to see if you still even have a job, or have been tweeting about how you’ve recently been fired. Maybe you’ve said you’re a homeowner on your credit card form, but on Facebook your status update says you’re currently crashing with friends. All of this, and inconsistencies like it, could be used against you. And the major players are starting to take notice.
“There could come a time where certain social media could be predictive and we’re looking at that, but it isn’t yet,” said Anthony Sprauve, senior consumer-credit specialist at Fair Isaac Corp (FICO), which provides the credit scoring used in more than 90% of lenders decisions. FICO says it is weighing possibilities for incorporating social media, and while the firms currently pioneering this practice tend to be smaller firms lending small amounts to folks with troubled histories, it seems likely to spread.
“It’s one of the tools we use to do underwriting,” said Sasha Orloff, co-founder and CEO at LendUp, who are backed by Google, amongst others. “Do you have 4,000 friends but none are that close, or do you have 30 people but they’re very close? There are ways to measure how engaged and how strong your community ties are.”
LendUp expects to make 300,000 loans in 2014.
Small businesses are also increasingly being checked by third parties for their social credit scores. One such firm is Kabbage Inc., which has granted more than $150 million in SMB loans since 2011, and insists upon access to Amazon, eBay or at least one e-commerce or accounting site of the application to assess creditworthiness.
“We look at whether you get a lot of ‘likes,’ are you responding to customers,” said Victoria Treyger, Kabbage’s chief marketing officer.
It works both ways, too. Lenders spotting positive traits on a social profile might be more likely to grant the application a credit line when they otherwise fell short.
“Is someone using an expensive mobile phone like an iPhone or logging in from a Web cafe? Is their network on Facebook just drinking buddies from a bar?” said Laurent Schuller of Kreditech, a microloan company based in Germany. “All of that can be important information.”