The Impact of “Social Media” on Your Creditworthiness
The next time you update your status on a social networking website, be extra careful. Sharing a casual update about your fun weekend on social media may have a direct impact on your credit score. In a move that disgruntled a large number of Americans, the Fair Isaac Corporation (FICO) recently announced to implement some new strategies to assess the creditworthiness of consumers, including taking into account the information found through social networking sites.
FICO is working with credit card issuers to compile an alternative form of data to determine the creditworthiness of individuals. It would help in identifying millions of consumers who qualify for the credit. Young borrowers are tech-savvy and present on various social media platforms, which give credit agencies to look at their attitude towards debt. The shopping data from eCommerce sites also helps in understanding the spending behavior of individuals.
The idea behind the use of social media to check the creditworthiness of an individual is quite simple. Social media postings help credit rating agencies to better understand and predict the financial habits of customers, and therefore, determine their creditworthiness. That is the reason every credit specialist encourages people to be careful when using social networking websites. But that’s not where the saga ends.
Social Media Screening
Some companies may request Facebook and Twitter passwords of applicants before approving the loan. The practice is quite unusual, but the practice is already around the U.S. and some other parts of the world. If an individual, for instance, talks about the weekend of debauchery in a social media post, the lenders might assume that the consumer has wrong spending habits, and thereafter, it would be difficult for the applicant to get an approval on their loan request.
Software to Capture Social Activities
Credit companies have introduced software to capture keywords or terms to predict the credit risk of a consumer. Systems such as Lenddo, for instance, believe that digital exhaust of lenders provides an idea whether a borrower will pay off a debt. Banks and investors are on a look out for such programs to make money lending safe and easy. The behavior of individuals on social networks often provides information about their character to the businesses.
A Few Last Words
When taken as a whole, social footprints shed ample light on the creditworthiness of 18 million prospective borrowers who don’t have access to credit as a result of negative reports, and 25 million individuals with no credit history. If you have any doubts, RMCN can help you get a better picture of the impact of social media on credit score. Feel free to get in touch with one of our credit specialists to learn more.