Slashdot Mirror
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?"
And in the EU there are data protection and privacy laws that could be used to deter this kind of thing.
At least George has Clarence as an angel investor.
Oh, yeah, it's not easy to pad these out to 120 characters.
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?
Rethinking email
I Wonder what if you don't actually have any of those accounts. For me I don't have twitter or linkedin accout at all.
"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.
The company iZettle, which provides "personal payment" via credit cards (chip reader that plugs into phone+app),
requires not only traditional autentication and a bank account - but also your facebook profile with an established social network. I.e. you must have friends as a voucher for your identity.
No facebook, no service. True, they dont base credit reports on your profile, but I find it a disturbing development where traditional identification and bank account are not enough (especially here in Sweden where we already are tracked since birth with the personnummer supercookie).
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?
No kidding!!! What do you say at this point?
Maybe not, but they could offer incentives like a lower rate if you provide a good social profile.
These comments are my personal opinions and do not necessarily reflect the opinions of the other voices in my head.
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.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
“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.
Better known as 318230.
They've dressed the issue up as something hypothetical, when in fact it already happens. It's just not banks that are doing it
Insurance companies are infamously snoopy and manipulative. They'll look at anything and everything they can possibly get their hands on, legal or not, to analyze your risks. I'd bet serious money that insurers already pry in social networks.
And they've managed acts of regulatory capture that would make even banks and defense contractors blush. Here in North Carolina you're not even allowed to have a driver's license unless you have car insurance. If you don't actually have a car that's tough shit; you can't even drive rentals or borrowed cars.
You are not borrowing it yet, if you just ask them. So they don't have any right to any data about you yet either.
Please mod me up, I want to refinance!
org.slashdot.post.SignatureNotFoundException: ewg
Frankly, I think Social media sites should not be used to judge someone for credit worthiness, or for jobs or for marking someone's abilities to perform work. People have lives that are not always accurately reflected from social media sites.
People do things in there personal time that is there personal time. This should not be used against you.
Conversely, people who don't post on social media sites should not be scrutinized either for their lack of personal info on the Web.
Credit worthiness is based on one's abilities to pay their debts incurred. Credit rating companies already provide this info.
While I think the way Credit agencies horde data on an individual is appalling, it does have the ability to show patterns in people and their spending.
Life takes interesting turns, but the most interest is when you're off the beaten path.
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.
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"...
Enjoy life! This is not a dress rehearsal.
You give it your professional ones not your personal ones.
Honestly what idiot is posting everything professional and private to the same profile?
Do not look at laser with remaining good eye.
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.
Sounds like a plan, so we live in a cardboard box until we can save the $60,000 to buy a crack house in the hood?
Renting is the same as credit. so I cant rent.
Do not look at laser with remaining good eye.
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.
Emotions! In your brain!
Worse, what verification could possibly be carried out that the Facebook/Twatter/whatever account is actually associated with the person in question? My name isn't anywhere nearly as common as "John Smith", but if I do a casual search for Facebook accounts with my name, I get 8 (approximate) hits. Who's to say that someone else can't poison my reputation, despite the fact that I do not have a Facebook account?
Inorite?
I didn't think much of "What's your favorite color?" or even "What's your favorite brand of pop?".
But then, out of nowhere it was all "If you *did* have a dead body to hide... where would you put it?"
I probably should have lied on that one...
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.
In general, you are right but it is not so simple. You have to factor in a lot of things like maintenance, property taxes, liability into the picture before you decide whether it is better to rent or buy. One big things people forget about is the transaction cost of buying and selling. This can be a significant portion of your cash outlays. Say you put a down payment of $20,000 on a $200,000 house. Brokerage and closing costs can be around $15,000 or higher. If you don't intend to live in a house more than a few years youmay just be better off renting.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
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.
If I have been able to see further than others, it is because I bought a pair of binoculars.
It's 100% bogus thinking in every respect. I don't know anyof my friends' financial situations, or at least every few. Most of my friends on Facebook are people I know from school (many years ago), from outside activities, etc. My friends from musical ensembles are (slightly) more likely to buy musical instruments and supplies, my friends from work are more likely to buy computer stuff, and the remaining folks are just a random cross-section of the population as a whole.
With the possible exception of my work friends, none of them are significantly more likely to have similar credit habits than the general population sampled at random. And my work friends don't really provide any additional insight into my credit habits that you couldn't get just as easily by asking where I work.
In short, it's crap. Maybe in a few edge cases, where someone has no credit history and didn't give a list of employers, you might be able to get some insight about where they have previously worked based on who their friends are, which might have some slight correlation to credit behavior, but even that is a stretch. Either way, anyone clueless enough to knowingly give out their Facebook and Twitter credentials to a bank deserves to have credit denied on principle. That's just not something you do.
Check out my sci-fi/humor trilogy at PatriotsBooks.
"but halfway through the application process, the website asks for his Facebook login. Then his Twitter. Then LinkedIn."
This seems like a fair data point for determining credit risk. Anyone stupid enough to actually enter this information is definitely a credit risk! The same goes for employers or potential employers who are starting to ask for this; if you are dumb enough to give them login credentials to your accounts then you are a security risk.
As for the rest of the article, I don't think the information on your social media sites is the least bit reliable for determining credit risk so financial institutions should not be using it.
You're not borrowing their money - they don't have any. What you're purchasing (you pay through interest) is a book entry. Credit is fraud. But it's not fraud for the simple reason that it's done through a bank.
Operation Guillotine is in effect.
First, Banks don't investigate you, they just check with the Credit Agency.
Never got a mortgage, have you? Well, I recently bought my first house.
Banks check with the credit agency for the prequalification process. After that they require you to submit a record of all your bank accounts and all of your bills. They call your landlord, then they call your employer, and not just for a generic "is he really employed there?" call, but also to grill your boss about what the chances are that you're going to get fired in the next 1-2 years. When I got my mortgage, they had my boss fax them three different statements regarding my employment over the course of one day. One of these was to confirm that I had indeed gotten a raise in the middle of the year, because they had done the math on my pay stubs and decided that the year-to-date earnings didn't match the twice a month salary showing on the stub for the last two months. The difference for the whole year would have been less than $3,000 due to when I got the raise. I could have easily qualified with my pre-raise salary.
In fact, I had a 820 credit score, no debt (but plenty of credit history), and enough money in investment accounts that I could have bought the house outright (inheritance from grandparents). I just wanted to take opportunity of the incredibly low interest rates these days. I shudder to think what the process is like for somebody who actually needs the loan.
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.
These comments are my personal opinions and do not necessarily reflect the opinions of the other voices in my head.
Any sort of publication is libel. Slander is spoken word only.
/. IANAL stuff applies...as always)
In the above example, though, that would easily be a slanderous lawsuit or, at the very least, a wrongful termination lawsuit. Let's think about it for a second. You are now applying to my company for a job and I am HR manager. As such, I contact your references and your previous employers asking what the reason for termination was, and they reply that you were terminated due to an extreme outstanding debt and they were worried about you doing anything in your power to repay it. This would constitute a reasonable termination and a decent reason to not hire you for most major corporations if they could prove it. As such, you would be able to sue the company for wrongful termination (if it weren't true) presuming they haven't done their due diligence and you would be able to sue the individual who slandered you (if you could prove it)
Now let's say Experian says you did owe the money. Until you clear that up with them, any employer that runs you through their background check will see that and compare you with another perspective employee who has similar credentials and throw your application out.
Morale of the story (at least in my mind) is we put too much stock in credit agencies.
(Oh, and all the usual
"Don't meddle in the affairs of a patent dragon, for thou art tasty and good with ketchup." ~ohcrapitssteve
Quick, someone look up Kevin Bacon's credit score!
This is rather curious. Being someone that has been one of the ones that actually needed a loan at one time, my process other than it being nerve racking, since my credit score was below what they would have liked it at, was relatively simple and I had no experience nearly as detailed and crazy as yours. They simply needed my employment status, wages and such and verification of that from pay stubs and that was that. That is a really weird situation, I wonder why that particular bank was scrutinizing you so closely. In any case your experience, I don't think, is the norm.
Everything what you say is true if the Credit Agencies play it fair. Unfortunately we all know that they do not give a shit about fairness.
That is true. They don't care about fairness. They only care about putting what is sent to them into their database. Credit Agencies do no digging of their own. They receive all of their information from creditors. The information that is reported to them does not allow for fields such as "Who are these people friends with" or "who have they friended on facebook." They have pretty much the same information on their database as you see on your credit report: Revolving balances, structured loans, outstanding amounts, monthly payments, creditors name and phone number, past due balances, judgements, writeoffs, previous addresses, psuedonyms and that's about it.
I worked for a time as senior database administrator at Transunion. This whole article is bullcrap. The scenario described in the summary is illegal.
If you are not allowed to question your government then the government has answered your question.
and enough money in investment accounts that I could have bought the house outright (inheritance from grandparents).
Fuck you, 1%.
So you could buy the house with cash, yet you deliberately decided to pay interest instead? You chose, say 3-4% interest or whatever it was over effectively 0% interest? Yeah, you definitely inherited your money.
Hey, AC, ever heard of a little thing called Opportunity Cost?
A house divided against itself cannot stand.
No. Banks have simply gotten more careful since the recent mortgage industry meltdown. This kind of 3rd degree used to be commonplace. Most people aren't aware of it here simply because they are too young and inexperienced. They haven't been in the mortgage market very long if at all.
This kind of grilling by bankers was pretty common back when they actually cared about you paying back the loan.
A Pirate and a Puritan look the same on a balance sheet.
Indeed, I've the same thing with a car, dealership offered 0.9% loan for the first year and 1.9% after.
I could bought it outright, but I can do do better than that in investments (Heck for the first year, a simple high interest savings does better), so I took the car loan.
Not quite... only *successful* landlords who actually make money are that way. The truth is, it's way more profitable to be a slumlord than to have affluent tenants. If you're a slumlord, you can rent out a shack that costs you $400/month to own for $200/week and pocket 99% of it. If you own a nice house or condo that costs you $1,600/month (mortgage, taxes, and insurance) to own, you'll be lucky to rent it out to someone "nice" for $2,000/month. Same $400/month nominal profit. The difference is, if you're a slumlord, there's no expectation of real maintenance. If something breaks, you can tell your week-to-week tenant to take a hike if he's not happy, and give the next tenant a $10/week discount. In contrast, the hipster renting your nice condo is going to demand instant (including weekend) repairs if *anything* goes wrong. A single clogged toilet has just wiped away your profit for March. A burned-out starter capacitor in the central AC is going to wipe it away for July (the slumlord will have to fix it too unless he wants an unrentable unit, but he can take his sweet time and pay someone to fix it off the books for $60 cash instead of as a $500 weekend overtime repair job).
Lots of aspiring middle-class investors found this out the hard way after they ended up being stuck with properties they intended to flip. They went into landlord-seeing-dollar-signs mode, and quickly found out that most of the time, if you own a nice property bought at the most insane peak of the real estate boom, you'll be lucky to LOSE "only" a few hundred dollars per month per year after you've collected the rent and paid the bills. The only landlords who genuinely make real money are the slumlords who own a few dozen or hundred units in cracktown and rent them out to poor people with no credit (because it's expensive to be poor).
What bothers me is that they seem to be looking for ways to lower credit scores of people who have good credit scores. It seems obvious to me that this has nothing to do with borrowing and repayment, as they want to keep linking in items that are not related to borrowing and payment history or income. They made a run at using driving records to contribute to credit history, and now social networking.
Their statisticians claim these are relevant, but if they are, why doesn't borrowing and payment history represent this? Next thing you know they'll correlate hair color or something and charge more, since blondes are slow pays.
My sense is that the purpose of this is to drive down credit scores for people who have good credit histories. Why? It allows banks to charge higher interest rates or more fees those borrowers, something of a rising tide that prevents a lot of shopping around as it gets factored into a "credit score" that all lenders use.
Creditors don't do a lot of individualized underwriting anymore -- it's not like the old days where you sat in the banker's office and told him how your mortgage payment was late because Aunt Dora died and you had to travel to the funeral and didn't get it in the mail or that you were in line for a promotion which would raise your salary by 35%. Now the banker just looks at your score and makes a decision. Shopping around is pointless -- it's the same score everywhere.
IMHO, this is the biggest problem with the dependence on the credit score. A small number of organizations (2, maybe 3?) generate them and lenders use them as an objective number. The problem is that the credit score sellers see banks as their clients, and thus have an incentive to suppress scores as it increases bank profits and the value of the score to the lender. ("Use our score and make more money.")
"In fact, I had a 820 credit score, no debt (but plenty of credit history), and enough money in investment accounts that I could have bought the house outright (inheritance from grandparents)"
must be nice...
It is, and I'm grateful for my parents to have raised me knowing the value of a good education so that I could get a nice job, and I'm thankful for my grandparents who put a lot of thought into saving up money they could leave me to give me a boost in life once they were gone. I've been very lucky with my life and my family, and I miss my grandparents greatly.
I'm sorry if you haven't had similar luck, and I wish you success in the future. I'm not sure what the source of resentment is, though. The entire point of my post was that I'm concerned for how people who haven't been as lucky manage to get their loans. I'm not saying that I deserve tax breaks or any advantage over people who are not as better off, I'm glad to pay my share to improve our society. I really don't understand the other AC who said, "fuck you, 1%." Would I be hearing similar comments if I had said I won the lottery, or is this strictly an inheritance thing? Did you expect me to give all of the inherited money to charity? What exactly have I done wrong?
The realtors always tell you you should buy the most house that you can possibly afford. Considering that mortgage rates are usually quite low compared to other loans and that houses usually appreciate, and mortgage interest is tax deductible that seems like good advice. But one also has to factor in that your house could go down in value, which was never seen as a real possibility until recently. Also, one has to consider that insurance, utilities and property taxes are going to go up at a rate that outpaces inflation, while your salary will probably underperform inflation. After looking at all that, it makes more sense to buy and live conservatively. But that is not in the best interests of the realtor. Unfortunately, learning stuff like that comes from experience, and the "ooh, shiny" of a large house can override the caution that experienced friends, parents ,etc.. may give you.
I hope you recover from your foreclosure and are able to take advantage of that unfortunate situation to give you an advantage in the future.
If you are not allowed to question your government then the government has answered your question.