Wikimedia Commons / Facebook

Lenders Using Social Media To Determine Creditworthiness

A Wall Street Journal feature shows lenders are looking closely into potential borrowers' social media activity to establish creditworthiness.

By Alex Mallin | January 9, 2014

It's no secret what you say or do on social media can come back to haunt you. But a new Wall Street Journal feature reveals some lending companies are using the sites to determine how creditworthy a person is. 

It could mean bad news for some borrowers. Several observed lending startups tap into everything from Facebook, Twitter and even the eBay accounts of prospective consumers looking to secure a loan. (Via The Wall Street Journal)

​Several firms said they use social media to find more info on current and prospective clients and to see whether there are discrepancies between what someone puts on a loan application and their online posts. (Via GeoBeats)

It sometimes will have even heavier influence than a person's FICO score, the credit score generally used to estimate risk. Instead of pure data compilation, lenders are able to weigh actual human activity in evaluations. (Via Khan Academy)

A writer for GigaOM says it just means one more point for credit evaluators to consider in what the site calls "data Darwinism … and has led to criticism from consumer advocates."

That criticism is mainly due to privacy concerns.

Companies will take into consideration how close prospective borrowers will seem with their friends. Some even check to see whether you use an expensive phone to manage your accounts. (Via Uproxx)

And in a similar manner to what employers and colleges have been known to check up on, lenders also evaluate social activities like how often a person is seen in pictures out at a bar. (Via USA Today)

But it could also be an advantage for those who manage accounts successfully. A higher viewership on a LinkedIn profile might make you more appealing, and favorable ratings on eBay could pique a lender's interest.

Regulators are reportedly looking into the trend. The Federal Trade Commission says it plans to host a series of seminars in the spring over emerging privacy issues in credit evaluations.

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