We have become accustomed to using social media to keep in touch with friends and family, be aware of the latest news and even promote a small business. But are you aware of the power of your profile regarding various aspect of your life such as your job perspectives or measuring your creditworthiness?
Social media platforms as a proxy
HR recruiters have been checking social media profiles of candidates for at least five years to assess their personality and learn if they would be a good fit for the team that would welcome them. And they are not only looking at the dedicated platforms like LinkedIn but digging deeper into tags on Facebook or tweets from that time you were still part of a frat-house in college.
The amount of data we share has led to the creation of dedicated algorithms that measure intelligence, attractivity or even sexual orientation.
Your credit score
The FICO score has been around since the late 80’s, and until now it has been a weighted average of five factors:
- Payment history (35%),
- Debt burden (30%),
- Length of credit history (15%),
- Types of credit (10%),
- Recent applications for credit (10%).
This combination yields a score between 300 and 850 for the classic variant. It’s worth to look at yours since this has a substantial effect on the interest rates you are offered and even if you are granted a loan at all. If you are unhappy with the number, think about ways to enhance it or hire professionals to do it for you, such as those from creditrepair.com.
Yet, even the Fair Isaac Corporation, the parent company of the FICO score has begun thinking about using the wealth of information provided by social media to assess the lending risk better. This decision might seem farfetched, but using Big Data to create customer profiles is already standard for retail chains.
The idea is justified by the associations and inferences between the content posted online and risky behaviors. For example, people who often used the word “wasted” (drunk or under drug influence) could have a higher correlation with the default risk. If the applicant is friends with people with lower credit scores, this could also be a signal of a higher risk due to similarities in behaviors.
Social media scores credit evaluation
The millennials are coming of age, and most of them use social media as a way of expressing themselves, sharing their thoughts, personality, and choices. This valuable information could be converted by sentiment analysis and natural language processing into a score like the FICO or could be included in the FICO as a sixth component.
This could be a great alternative to prove their goodwill for applicants with no credit history such as fresh college graduates or immigrants. Also, as the holder of these accounts, you have the option to present yourself in the best angle possible by choosing your words, hashtags, or even friends.
The system is risky since users have full control over their profiles and they could try and game the system by displaying only socially acceptable and credit-enhancing information or keep several profiles, under aliases.
Also, this approach could be interpreted as discrimination or overstepping personal boundaries and adding pressure to applicants to use these platforms, that not all are interested in. Finally, the user should give their consent and written approval.
Some companies including Kreditech, Moven, and Zest are already experimenting with this alternative credit scoring option. Of course, they are not taking their entire decision on your latest update, but they acknowledge that it plays a role in the outcome.
At this time, it is only a wild idea, but it is also an alert to be more careful what type of information we are sharing about ourselves.