CNN ran an article recently about all of these new start ups using social media profiles and even Pay Pal to determine if you’re worthy of a loan. I’ve written twice before about start ups using your social media profile to determine credit worthiness and how they will become more popular. While I do think your network can determine your networth, I’m still not a fan of companies using online social networks to determine whether I may pay back a loan.
I have so many different people in my social media profiles: long lost high school friends, old coworkers and senior citizen aunts. These people make up my online social experience, but they for sure have nothing to do with whether I can pay back a loan. They are people I’ve met along the way. I would hate to think I could be penalized for keeping in passive touch with someone by simply accepting a friend request.
FICO factors different types of financial information to determine a credit score. If you have spotty credit, there are many ways to help boost your score and clean up your credit profile. Social media sites are easy to game. I’d like to see how these start up will read fake accounts people purchase to beef up their online presence.
Many of these start ups are popular in emerging markets where credit is tight. If your social network is for sale, then by all means use these services. I hope we aren’t connected digitally. I wouldn’t not want you even as a passive Facebook friend.
I think if you’re in the United States, it’s best to make sure to pay your bills on time, pay down debts and have a stable work history to help you with your loan applications.
Using social media connections to determine if you pay your bills or not seems like blatant stereotyping.
I see more of these start ups continuing, but luckily we’re not at the point where they are mandatory for anyone seeking a loan.
I wonder if these companies are using other data such as your friends’ racial and ethnic backgrounds, also.
Would you drop your friends on social media if it would mean getting a loan easier? What do you think about social media being used to determine your credit worthiness?
Thank you, Frugalista reader Chrisalyn, for the tip!