Can Social Media Hurt Your Chances of Getting a Loan?


You’ve heard that social media accounts may influence your future job or other prospects, but did you know it can also impact your credit score, making it harder to secure a loan? In fact, a number of startup businesses have begun to factor in social media use as a way to determine whether a consumer or a business is credible and whether they should or should not be approved for a loan.

Take Lenddo for example, a company that has said to determine a person’s creditworthiness based on their Facebook, Twitter or other social media profile. Lenddo takes into consideration a borrower’s social media habits, how many friends and followers they have, and whether anyone they interact with has an open account with Lenddo. If a friend does have an account, Lenddo will factor in that person’s credit history to determine yours.

You’ve heard that social media accounts may influence your future job or other prospects, but did you know it can also impact your credit score, making it harder to secure a loan?So for instance, if one of your friends (especially one that you interact with on a frequent basis) was delinquent in a loan, that fact can negatively impact your chances of being approved. On the contrary, if a friend is frequent in paying their loans, it can improve your chance of getting a loan.

“It turns out humans are really good at knowing who is trustworthy and reliable in their community,” said Jeff Stewart, a co-founder and CEO of Lenddo. “What’s new is that we’re now able to measure through massive computing power.”

Kreditech is a similar company, based in Germany, which uses up to 8,000 data points when assessing an application for a loan. While they use Facebook as a point to determine creditworthiness, they also take into consideration eBay and Amazon accounts, as well as the approach of how someone fills out their online application. When a consumer spends time reading important information about the loan on Kreditech’s website, that person’s chances of being approved for a loan are greater than if they didn’t. In addition, if that person types in all capital letters, their chances lessen. Kreditech can also pinpoint a consumer’s location and can use that to determine creditworthiness as well.

The CEO and co-founder of Kreditech, Sebastian Diemer, said that even though each of these factors that Kreditech uses to determine loan approval may not seem vast, these aspects can overall paint a good picture of an applicant.

While Lenddo and Kreditech aim to target middle-class consumers in rising markets, a company called Kabbage offers cash advances to small businesses who sell via the web. When signing up for Kabbage, the business has the option to link up its Facebook and Twitter accounts to the site. These small businesses who choose to do so are 20 percent less likely to be delinquent on their loans, according to Marc Gorlin, chairman and co-founder of Kabbage.

“Someone who’s paying attention to Facebook and Twitter channels to deal with customer service is more likely to be on top of other parts of their business, too, like inventory and shipments,” he said.

According to Katie Lobosco, a breaking news reporter for CNN Money, “Using ‘big data’ to assess credit risk is on the verge of going mainstream.”

However, there are some skeptics.

“To me, using social media is a little bit dangerous,” says John Ulzheimer, a credit expert at CreditSesame.com, adding that social media accounts are likely not indicative of whether someone will be delinquent or pay back a loan on time.

Plus, there may also be some loopholes.

“There’s the potential to game the system,” writes Lobosco. “Consumers can easily control how many Facebook friends they have and tweets they write. The same cannot be said for what goes into their credit score.”

 

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