Should Social Media Affect Your Creditworthiness?

theodp writes "Betabeat's Adrianne Jeffries takes a look at the questionable young science of using social media to evaluate creditworthiness. As banks start nosing around Facebook and Twitter, Jeffries explains, the wrong friends might just sink your credit. 'Let's take a trip with the Ghost of Christmas Future,' she suggests. 'The year is 2016, and George Bailey, a former banker, now a part-time consultant, is looking for a 30-year fixed-rate mortgage for a co-op in the super-hot neighborhood of Bedford Falls (BeFa). He has never missed a loan payment and has zero credit card debt. He submits his information to the online-only PotterBank.com, but halfway through the application process, the website asks for his Facebook login. Then his Twitter. Then LinkedIn. The cartoon loan officer avatar begins to frown as the algorithm discovers Mr. Bailey's taxi-driving buddy Ernie was once turned down by PotterBank for a loan; then it starts browsing his daughter Zuzu's photo album, 'Saturday Nite!' And what was this tweet from a few years back: "FML, about to jump off a goddamn bridge"?' So, could George piggyback his way to a better credit score by adding Larry and Sergey to his Google+ Circles?"

Comments

News for nerds, stuff that matters

[vikingpower]

C'mon, slashdot.... Is this news ? Does this matter ? Slow news day ?

Re:News for nerds, stuff that matters

[MyLongNickName]

What am I not understanding? This story seems relevant to me. If you don't agree, you are free to click on a different story.

Re:News for nerds, stuff that matters

[Dan East]

“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.”

This is about a new wave of companies trying to make inroads into the banking business. This BS story is just them peddling their wares and trying to raise some eyebrows and maybe get a bank or two to give them a serious look. You've got these companies already doing marketing for banks by digging into our social networks, and now they think they can make more money and become that much more important (legitimate?) by actually helping the banks make their credit decisions. 100% wishful thinking at this point. Let's hope it stays that way.

Re:News for nerds, stuff that matters

[Anonymous Coward]

What am I not understanding? This story seems relevant to me. If you don't agree, you are free to click on a different story.

Really? How is this relevant:

"He submits his information to the online-only PotterBank.com, but halfway through the application process, the website asks for his Facebook login. Then his Twitter. Then LinkedIn."

First, Banks don't investigate you, they just check with the Credit Agency.
Second, this would require a change to what is allowed to count against your credit score, credit rating companies cannot just arbitrarily pick random shit.
Next, this would require a wholesale change in the entire way our society handles private contracts. Giving the logins above would be a breech of TOS for all those sites just to start with.
Additionally, this would require a complete 180 turn in regards to the Computer Fraud and Abuse Act. Currently if someone were to login using your credentials, they would technically be in violation of the Act as it would be considered Unauthorized Access to a Computer or Network Device, which just so happens to be a Federal Felony.
And Finally, the second any of those things were done there would be a court case challenging the practice on the grounds of Right to Free Association.

So in closing, no this is not relevant, and if you insist on having it then it should be in the Idle section not on the front page.

Re:News for nerds, stuff that matters

[Qzukk]

credit agencies breaking the law in a way that treats individuals inequitably

That's kind of hard to do, since the government wrote the law to protect credit agencies from the effects of their fuckups.

If I told your boss you owed me five million dollars and your boss decided you were a risk and let you go, you'd have lawyers out the wazoo begging to take up a slander/libel case against me. If Experian tells your boss you owed me five million dollars and you lost your job, they're out a mandatory credit report.

Re:News for nerds, stuff that matters

[Captain Hook]

You may have got extra attention because of the money you had access to. They may well be wondering why you want to get a mortgage when you don't need it.

No, obviously

[pjc50]

And in the EU there are data protection and privacy laws that could be used to deter this kind of thing.

Re:No, obviously

[Quiet_Desperation]

It's also easy to trot out the old "run for office yourself!" trope which ignores much of modern reality.

Anyone not corruptible or already immoral will lose out to the sociopaths and insiders. That fault is the media that ignores issues (beyond a very shallow level) and goes after the dirt, incessantly and with a blood rage. You need to absolutely not give a shit what anyone thinks about you or says about you to survive.

I've worked on campaigns in the past at a high enough level to interact with the candidates. I've seen it first hand. Above city council positions for *small* cities, your typical "nice person" is eaten alive and spit out so fast it's just a blur. And we have small towns here in California that have been revealed to be corrupt warrens of asshats. Any outsider who challenges them is put down quickly via lies and outspending thanks to all their cronies in local business interests and public employee unions. What's that? Businessmen and unions are enemies? Ha ha! You're a silly pony!

This has been going on in one form or another since the year dot. The power structure has been breeding these monsters for millennia.

That bank would be bankrupt fastly

[marcosdumay]

Everybody that uses social networks have connections to somebody that gone broke, or made bad comments on the past. That fictional bank wouldn't be able to lend money. Thus wouldn't generate any revenue.

Searching social networks will probably happen on the real world, but you can bet the information the banks will gather will be way saner than that, and they won't jump to conclusion that fast.

Now, about the real problem. Why is everybody so concerned about their credit worthness?

Re:That bank would be bankrupt fastly

[Trepidity]

I suppose we could break it down into two questions:

1. Is using social-network data to evaluate creditworthiness actually accurate?

2. If it is accurate, do we think doing so is a good or bad thing?

Your point is about #1, but I think probably there is a way, given good enough statistical analysis, to extract a good predictive signal, so the real long-term question is not whether it works, but whether we should let it be used.

Re:That bank would be bankrupt fastly

[BMoore60610]

Now, about the real problem. Why is everybody so concerned about their credit worthness? You must be from Europe. Over the past 20 years in the USA (and I think Canada) a person's credit worthiness is everything. Both positive as well as negative information is reported and not having a decent credit score can negatively impact your quality of life. (...) What the US needs are EU style data protection laws.

You don't have to be from Europe to see the lies behind the current system of credit in America. The whole thing is designed so that people must have debt in order to beg the banks for more debt. It's absolutely crazy. If we teach our children to save for the things they need (and do so ourselves) we could end this horrible economy for good. Sadly people are too intoxicated by instant gratification (i.e. selfishness) for that to ever happen on a grand scale. What the US needs is a bat-symbol-in-the-sky sized CLUE.

Re:That bank would be bankrupt fastly

[fsckmnky]

If you're using your credit card as a source of credit (instead of as a debit card), you're doing it wrong.

Credit cards are no so much a "source" of credit, as they are an access method to a line of credit. Personally, I don't use a debit card, ever, except to occasionally make the ATM machine function. Using a debit card for transactions in a brick-and-mortar store, or on the internet, exposes your funds on deposit to significant risk should it get skimmed, or a website where you used it gets compromised. Good luck getting your cash back after that happens.

With a credit card, you can simply dispute the charges, and the risk is entirely on the merchant and/or the bank. Stores would prefer people to use debit cards, because the fees on their end are lower, due to the transfer of risk to the debit card holder.

( Applies to US ... other countries, maybe, maybe not )

Re:That bank would be bankrupt fastly

[TheRaven64]

You're missing the point: if you can get 15% on a credit card, you can almost certainly get under 10% on an unsecured personal loan, and less on one where you put up some collateral. Credit cards are very rarely the cheapest way of borrowing money, so using them to borrow money is generally a bad idea.

Lolwut?

[ToiletBomber]

"halfway through the application process, the website asks for his Facebook login. Then his Twitter. Then LinkedIn." If any site of a supposed financial institution were to start asking for my logins for any site other than it's own, frankly I would run from that site like the plague.

They're all indicators

[Sockatume]

This isn't going to be particularly pleasant to hear, but ultimately these sorts of activities are all about finding indicators of your likeliness to default on your credit, in much the same way that indicators are used when providing insurance to evaluate someone's likelihood of needing to make a claim and price them accordingly. So having these extra indicators isn't by itself necessarily bad. It's not in the lender's interests to come up with bad indicators. To stay competitive, they have to strike a good balance between covering their ass and giving you a better rate than the next lender. So ultimately they're trying to find out something about your creditworthiness (as a probabilistic measure of default) that is more likely to be right than wrong.

The real philosophical issue is, if non-financial indicators are used to evaluate our creditworthiness, then are we being unfairly induced to make changes to our lifestyle to accomodate our need for credit?

Search for AC

[bradley13]

Dear bank, sorry, I can't give you the login directly, privacy you know. But (wink, wink) you can find them - just Google for my nickname "Anonymous"...

I see positives here, not negatives

[Anonymous Coward]

If you have a credit history, the bank is going to use that to determine whether to give you a loan or not. Paid off all your debts? Make more money than you spend? Never had a late payment? Banks will be falling over themselves to lend you money. Defaulted on everything? Bankruptcy? You're going to have some high interest rates.

What I see here is a tool banks and credit unions could potentially use to inform them about people without a credit score. Maybe I haven't had a credit card or mortgage before, but the fact is that I have a good work ethic and deep sense of integrity about paying of my debts... up till now, a lending institution has very little way of differentiating me from the kid who doesn't understand credit and thinks it's free money.

Now, if the institution can check my interests, and simple, potentially-significant measures like my quantity of friends or how many people like my updates, they may be able to determine whether I'm a safer risk. If they do, it's better for me.

I know it's kind of a devil's bargain -- give them the ability to look at private info for a reasonable, helpful purpose and next thing they'll be making bad decisions based on it... I would never consider letting a faceless megacorp like BofA or Wells Fargo look at it. But my bank has 2 branches, and everybody there knows my name... some of them could legitimately be my real facebook friends. I don't have a problem sharing my social networking info with them. It has the potential to be a win-win with better rates for me and lower risk for my bank.

Makes no sense.

[Securityemo]

The second this takes off, there's going to be a business in optimizing people's social profiles - if nothing else, the things you should have/not have on your profile will spread through word of mouth and experience. The reason facebook et al is used for evaluating people is the idea that people might not "keep up appearances" there, right? But if it impacts your personal finances or job prospects most people would just tighten up out of fear. It's self-defeating. It's also dreadful since it'd presumably lead to people making themselves out to be oily cookie-cutter smilies for financial benefit, conformity of the worst kind.

NO

[cbope]

Absolutely not. I'll tell you why: There is currently no way to verify who you say you are on social networks, hell, some of them you can sign up with a fake, made-up name... all you need is a valid email address which can be anything. Oh, and that email address can be webmail, which also does not attempt to verify your identity. This makes it incredibly easy to set up fake accounts or profiles in someone else's name.

Absolutely NONE of these services have a way to accurately verify your identity. They don't even try for the most part. This alone means that searching for Bob Smith's facebook page does not guarantee that I find the real Bob Smith's facebook page. Or that anything posted or linked to Bob's profile has any accuracy whatsoever.

Stuff can become attached or linked to your social media profile, even without your knowledge. Character assassination anyone? Someone you know (or even don't know) can take a picture, post it online and tag it with your name, and there is absolutely no way to verify who is in the picture. I can take a picture of my cat taking a dump and post it, tag it with a friends name, and this will then get linked to their profile.

Do you see the problem with this? If a prospective employer or a credit service wants to search for my name on social media sites fine, but I expect they will be smart about actually using unverifiable information to determine my credit or job worthiness. The mere act that they would use unverifiable data to back up a decision on something important like a job position or a credit score, tells a lot about the company. Luckily I live in the EU where this sort of thing is not widespread and we actually have strong personal data protection laws.