How you socialize online, who with, and how often can make or break your loan application: True or false? It is true, surprisingly. And it is likely to become more so.
With banks still reluctant to lend and a rapid rise in subprime customers, it is more essential than ever to be realistic about the responsibility of lending money to finance big-ticket items with long-term repayment schedules. This is in the best interests of both parties.
Contrary to the picture painted by some commentators, who are keen to insist that finance companies are ruthless operators, luring unsuspecting and non-credit-worthy clients into their snares, those of us who are in the business actually take our applicants very seriously, indeed. We would never want to put anybody into an untenable, unrealistic, and unaffordable position, whereby they were compromising their entire lifestyle for the sake of, say, a new car.
Likewise, we do not want to take on customers who are not going to pay us back. So where does this leave us, morally, in the unprecedented access to individual data now available thanks to the information-gathering properties of the Internet?
Recent news articles have picked up on the monitoring of social media interactions as a means of assessment on a person’s status. While none of us are so naïve as to imagine that anything we do or say online is somehow mysteriously private, no matter what settings we employ, it still seems to provoke a degree of hysterical indignation when those who willingly expose every aspect of their existence on Facebook are then judged by it.
Traditional lenders are still sticking to the traditional modes of enquiry, using credit scores like FICO or agencies like Experian to assess lending suitability, but many of the newer and more tech-savvy startups are taking a different approach. They scrutinize social data and online behavioral patterns to make their decisions and determine credit risk.
For example, one company, Lenddo, in what it is calling a “trust-based model,” will not lend money to someone who is friends on Facebook with another person who has been late, or defaulted on a loan from it in the past. If the friend is someone with whom you have frequent interactions, the decision is even more likely to go against you.
Of course, you may have no idea, no understanding, and no knowledge of your friend’s financial history and dealings, but this is not something you will have a chance to explain. Lenddo will consider that your friendship with the defaulter is enough to dissuade it from considering you credit-worthy. Lenddo’s theory is that those in debt difficulties are more likely to be friends with those in similar circumstances. Lenddo Co-Founder and CEO Jeff Stewart told CNN: “Humans are really good at knowing who is trustworthy and reliable in their community.”
Lenddo is not alone in adopting this investigative stance. Movenbank assesses numbers of followers on Facebook, Twitter, and LinkedIn to evaluate prospective customers’ influence and social standing. Payment information can also be sourced from sites like eBay, PayPal, and Amazon.
How We Operate
Other online habits are unwitting traps. Many users are guilty of being slapdash with spelling, punctuation, and grammar in email and text messaging, often because those communications are sent in haste or on the move and without much attention to detail. Such traits — using all capitals or no capitals, for example — are taken as dubious signs by German lender Kreditech, which will not lend to anyone who fills out one of its forms in this careless way.
Another habit to be aware of is that the amount of time you spend browsing and investigating a site can be closely monitored and assessed. Payday loan outfit Wonga likes to see that a person has gone through various options before they submit. Someone who goes straight to click for the highest loan possible without due consideration is high-risk to Wonga.
We are, each and every one of us, leaving a digital footprint that cannot and will not ever be erased and that speaks volumes about us. Should we be surprised when this evidence is examined? Kreditech is branching out by selling its technology to online lenders in the Czech Republic and in Russia, and Kabbage, another online cash-advance service, has plans to do the same. It would appear that this model is about to go mainstream.
Should You Start Ditching Your Facebook Friends?
This would probably be a knee-jerk reaction to what is still an emergent trend. However, it is probably wise to take due care and consideration with whatever you post and whoever you post it to. The overall picture that emerges when all data are collated is one that will increasingly come to represent you in your entirety — including as a credit risk.
Image courtesy of Shutterstock.