Your Credit Score and Social Media

Well, this is slightly unnerving. In a BetaBeat post titled “As Banks Start Nosing Around Facebook and Twitter, the Wrong Friends Might Just Sink Your Credit,” we learn about a new wave of start-ups that is…

working on algorithms gathering data for banks from the web of associations on the internet known as “the social graph,” in which people are “nodes” connected to each other by “edges.” Banks are already using social media to befriend their customers, and increasingly, their customers’ friends. The specifics are still shaking out, but the gist is that eventually, social media will account for at least the tippy-top of the mountain of data banks keep on their customers.

“There is this concept of ‘birds of a feather flock together,’” said Ken Lin, CEO of the San Francisco-based credit scoring startup Credit Karma. “If you are a profitable customer for a bank, it suggests that a lot of your friends are going to be the same credit profile. So they’ll look through the social network and see if they can identify your friends online and then maybe they send more marketing to them. That definitely exists today.”

And in the last year or so, financial institutions have started exploring ways to use data from Facebook, Twitter and other networks to round out an individual borrower’s risk profile—although most entrepreneurs working on the problem say the technology is three to five years away from mainstream adoption.

Here’s what I am thinking. If you have a solid credit rating, then exposing your social media outlets could potentially hurt you. On the other hand, these algorithms may be devised such that you take a bigger hit if you don’t divulge your information. If you have a poor credit rating but a strong network of friends, then divulging your social media crumbs could help you in your overall credit score. One thing is for certain, however: if there is any way that a bank could find out more information about you to better predict your ability to repay a loan, the more aggressively it will try to implement the schema into its arsenal of judging your credit score.

We live in a brave new world.

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