Do All Of Your Facebook Friends Have Good Credit?
Some financial companies look at potential borrowers' social media footprint -- including their friends and, eventually, their friends' credit scores -- to determine whether they qualify.
What's the Latest Development?
A small group of financial services companies targeting select audiences are using data from Facebook and other online accounts to help determine the credit-worthiness of a potential borrower. One company, Lenddo -- which operates in Colombia, Mexico and the Philippines -- checks to see if a possible customer is friends on Facebook with an existing customer who was late in paying back their loan. In addition to perusing social media accounts, another company, Kreditech, actually tracks how a person completes their online application, taking off points for such things as typing in all-caps.
What's the Big Idea?
Most financial services companies still prefer to look at a person's credit history through traditional means, like FICO scores. However, Kabbage co-founder Marc Gorlin, whose company specializes in giving out cash advances to small business owners, says that by including information from borrowers' eBay and PayPal accounts alongside the credit score, "[w]e can get much better, faster data." Credit expert John Ulzheimer says that despite FICO's limited number of determining factors, it's "incredibly predictive of risk...To me, using social media is a little bit dangerous."
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