How Deadbeat Facebook Friends and Using ALL-CAPS Can Lower Your Credit Score

McGruber writes "CNN has the news that some financial lending companies claim that Facebook social connections can be a good indicator of a person's creditworthiness. One company determines if you are friends with someone who was late paying back a loan; if so, that is bad news for you. It is even worse news if the delinquent friend is someone you frequently interact with. Another company gathers information from the manner in which a customer fills out the online loan application. The chances of getting a loan improve if you spend time reading information about the loan on their website. Conversely, if you fill out the application typing in all-caps (or with no caps), you are knocked down a couple pegs in that company's eyes. A third lender requires that small business borrowers grant them access to the borrowers' PayPal, eBay and other online payment accounts (what could possibly go wrong with that?), thereby disclosing real-time sales and delivery information."

Comments

Kind of a warning sign actually

[Anonymous Coward]

If your bank carries that much stock in Facebook "friends" you may want to consider borrowing from a different bank.

Kind of like employers who want your twitter password, just maintain eye contact and slowly back out the way you came in.

Re:Kind of a warning sign actually

[Conspiracy_Of_Doves]

The problem is, how do you know whether the bank even uses that as a metric?

Re:Kind of a warning sign actually

[ShanghaiBill]

There was a much better article about this in the Economist a few months back. The banks don't ask you for a list of your Facebook friends. It doesn't work like that. They get the information as part of your score from credit agencies. You will never even know it is happening. But I don't see why this is worse than other things they consider, like your zipcode or marital status. You are judged by the company you keep. Deal with it.

Re:Kind of a warning sign actually

[lightknight]

"Bank of America wishes to be friends with you. Do you accept their request?"

Re:Kind of a warning sign actually

[mrclisdue]

The problem is, how do you know whether the bank even uses that as a metric?

Well, if it's an American Bank, they haven't even switched to metric yet....

....I'm maintaining eye contact and backing away slowly....

Re:Kind of a warning sign actually

[nospam007]

"Easy. How would they know who my facebook friends are?"

They _buy_ that info from FB, remember, you are the product, they are the client.

Re:Kind of a warning sign actually

[pluther]

... people with enough real life to not have time for facebook. . .

I love how people keep claiming they have a life and therefore don't use social networks... on Slashdot.

Re:Kind of a warning sign actually

[Jiro]

Using someone's skin color as a factor in whether you grant them credit would also be statistically relevant and improve profit. We don't permit it, for a very good reason.

Only in the modern era has it become possible to discriminate based on so many other criteria as easily as based on race. If someone walked into a loan office, their race was normally visible. But whether they were a Star Trek fan or whether they're in a knitting circle with a deadbeat wasn't, and it wouldn't be worth the lender's effort to find out.

Re:Kind of a warning sign actually

[AmiMoJo]

I don't know why I'm surprised at how little consumer protection there is in the US any more. In the UK credit agencies are regulated and can't just use any information they can lay their hands on. You can add your own notes or get it corrected too.

One thing that is specifically forbidden to be used is who you associate with or who you are related to. That's how we "dealt with it".

Re:Kind of a warning sign actually

[ColdWetDog]

Slashdot is an unsocial network. Thank you very much.

Now, get off our lawn.

Re:Kind of a warning sign actually

[Anonymous Coward]

Slashdot is really more of an antisocial network.

Re:Kind of a warning sign actually

[bdwebb]

Your FB friends are not trustworthy and therefore /. has restricted your access to the moderation system.

Re:Kind of a warning sign actually

[bdwebb]

That's always the pain of statistical models: someone's an exception.

And in the case where someone is an exception and can prove that their associations are the cause of being denied a loan or a job or in any way effecting an individual's credit, here comes the lawsuit. You cannot legally be denied employment and your creditworthiness cannot be effected by your associations. This would have far-reaching discriminatory consequences with regard to race, religion, financial 'class', etc. and ultimately force people to cut off others in their life who were not 'reliable'.

Setting this precedent allows a true class-style system to be introduced whereby unless you are in the 'reliable' category, it is almost impossible to become 'reliable' because 'reliable' people won't associate with you or give you jobs. People would potentially be forced to ostracize family or friends from their realm in society for fear of being dubbed 'unreliable'. This sounds eerily like Gattaca except with financial systems instead of genetics (I know that a better reference is Huxley or possibly even McCarthy in some ways but I just watched Gattaca again a few days ago and it is fresh in my mind).

Dubious Credit Criteria

[MyLongNickName]

Dubious credit criteria and validation got us into a huge subprime mortgage mess and contributed to an economic downturn. Fortunately, this method doesn't appear to be widespread, but the same principle applies. Folks haven't learned the lessons of the last 100+ years and seem doomed to repeat the outcomes.

Facebook is the most expensive free service ever

[JoeyRox]

The personal and privacy costs of being a Facebook user are very high and increasing daily. No thanks.

WHAT?!

[Anonymous Coward]

HOW DOES I GET CREDIT CARD?

I think the wider story here is

[Rosco P. Coltrane]

How using Facebook at all can bring harm to you in real life.

Case in point: a colleague's teenage daughter applied for a summer job at the local supermarket, got selected and went to a job interview. The interviewer asked her to "describe herself". She did, and the interviewer then said "that's not what your Facebook says. Thank you, we'll call you." She's only 16 and she wasn't doing anything particularly public or outrageous on Facebook. It hit her hard and my colleague says she's been kind of depressed by the rejection she's faced.

As for me, I've learned the hard way 13 years ago (before Facebook but after Google) that the internet never forgets, and whatever you say will come back to haunt you eventually. As a result, I've learned to shut my trap online whenever possible.

If you don't have facebook account...

[sinij]

If you don't have Facebook account, banks conclude you are a sociopath and offer you CEO job.

The devil, as always, is in the details

[LNO]

The summary leaves out that the companies described aren't the major financial institutions in the US. The one who checks to see if you're friends with someone who defaulted on a loan from the same lender? Lenddo, which makes loans in the Phillippes, Colombia, and Mexico. The one who LOOKS FOR ALL CAPS? Kreditech in Germany, which uses that and "up to 8,000 data points" when assessing the loan (though I can't argue with that; as someone sitting down with a banker in person and YELLING THAT THEY WANT A LOAN is probably not a reliable borrower).

As for whether lenders should just use FICO, if FICO is available? It's reliable and predictive, and more difficult to game, but in an emerging market where your prospective borrowers don't have FICO history, what do you do to suss out whether a borrower is likely to default or not?

Affinity Group Lending

[iluvcapra]

I keep some of my savings at Lending Club, which originally started out as a Facebook-based microlending platform -- the idea was that if you knew the people you were lending to, or at least understood their social graph, that you'd make better lending decisions. They dropped the concept a few years ago, my guess is that it didn't scale and there were practical difficulties. (I could see issues arising from sockpuppetry and slander, among other things...)

They do still loan to individuals, and when you lend you read their application, you can see where they live, their FICO, and what they plan to do with the money. And, guilty as charged, I never lend to people to do their application in ALL CAPS :)

"Deal with it." Seriously?

[Anonymous Brave Guy]

You are judged by the company you keep. Deal with it.

If we had just "dealt with it" every time those with power abused their position, black people would still be slaves, women would still not have the vote, children would still be down in the mines, and manual labourers would still barely earn enough wages to live while working crazy hours under conditions that would seriously damage their health.

We have a long way to go, even in the first world, in terms of respecting each other as human beings. We aren't going to get much further if we adopt your attitude every time essential services that make society work start taking advantage of asymmetric power relationships with the ultimate goal of making more money no matter what.