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Lenders Hope to Incorporate Social Media into Credit Scores

Posted on December 19, 2011

Facebook users beware: your social media actions and even friends list could start affecting your credit score.

According to an article by New York Observer’s BetaBeat, new startup companies are formulating algorithms that integrate information from websites like Facebook and Twitter, which they refer to as “the social graph,” where people are recognized as “nodes,” and are connected by “edges.” In essence, the companies hope to further expand on qualifying factors for obtaining loans and also intend on shopping out loans to people in a consumer’s friends list.

Critics have already started lambasting the idea, citing that banks could use social media to obtain information they are not legally allowed to inquire about, including marital status, race, religion and a plethora of others.

One company that is actively pursuing this technology is Lenddo, a small loans lender based in Hong Kong which is currently only serving the Philippines, but hopes to expand to the Americas in the near future. Lenddo’s borrowing requirements will put a huge emphasis on your Facebook friends list, determining a consumer’s worthiness for a loan by their friends’ ability to repay their own loans as well as some other erroneous and arbitrary factors. Lenddo also reserves the right to contact a consumer’s social media connections, including friends and family, in the event that the consumer defaults on their loan.

It’s yet to be seen how the major credit bureaus in the United States will take to such technology, but Equifax gave some insight into their stance through an email sent to BetaBeat.

“Our corporate development professionals are very aware of the opportunities to enhance our proprietary data and partner with companies who add value to the accuracy of our reporting, which helps our customers make better decisions prior to lending,” a company representative wrote.

It should be common knowledge by now that if you don’t want to broadcast your life the world, simply avoid doing it. Perhaps a good rule of thumb should be “don’t have anything on your Facebook page that you wouldn’t mind your mother seeing.”

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