There are reports that your social media profile – on Facebook, Twitter and the like – could be used in the future to assess your credit rating. Is it time to delete those tweets saying that your latest credit card statement made you scream?
The New York Observer first mentioned the idea last week (this was followed up by a post on the PC World website How Facebook Can Hurt Your Credit Rating) when talking about a new small lender called Lenddo, based in Hong Kong.
This new company asks for access to your social media accounts before you can access a loan, and won’t lend money unless you’re of good standing on these virtual networks.
And if you don’t repay in a timely manner there’s a sting in the tail – as the site warns:
“Failure to repay will negatively impact your Lenddo score, as well as the score of your Lenddo friends. Lenddo MAINTAINS THE RIGHT TO NOTIFY YOUR FRIENDS, FAMILY AND COMMUNITY if the borrower fails to repay”
While no one can borrow money from this lender in the UK, it’s an eye-opening use of social media that could have a huge impact on your financial life if it’s adopted by financial insitutions and credit agencies here. Do you want your Facebook friends knowing that you can’t pay your bills?
Social media credit scoring?
And worse than that, even though your credit rating isn’t harmed by other people at the same physical address, what if your virtual friends had an impact on your creditworthiness? As the article’s writer warns:
“Choose your online friends wisely, for they may one day determine your APR.”
The idea is this: your credit rating tends to be based on information that’s, at best, weeks old. What if the likes of Equifax decided to monitor your current behaviour via your social media account?
For a better indication of how your finances are right now credit agencies could check a your and a friend’s Twitter updates and find that you spent a fortune in a casino at the weekend. If you’ve then missed a credit card repayment yesterday and applied for a new loan today, those tweets would be a warning flag for current and future creditworthiness.
As Equifax, a credit agency, said in the article:
“Our corporate development professionals are very aware of the opportunities to enhance our proprietary data and partner with companies who add value to the accuracy of our reporting, which helps our customers make better decisions prior to lending.”
What does that mean in plain English? Probably that status updates or tweets could give them more “accuracy”, especially if you, or one of your friends, seems to ‘reveal all’ in their minute-by-minute status updates.
The wider issue of debt and social media
Our advice then, as it is now, includes:
- Avoid using the web to talk with anyone you don’t know
- Change your privacy settings to their highest level
- Don’t accept followers you don’t know
While the OFT have since warned debt collectors not to use social networks to track down loan defaulters, a lot of people talk about their personal finances on social media; see our 10 best tweets about credit card bills in January (sample tweet: “It’s been a while since I last cried, then I saw my credit card bill”) for some brilliant examples.
Avoid revealing your financial details on social media
We definitely recommend that you change your privacy settings in Facebook and Twitter to hide your tales of money-fuelled debauchery (obviously, if you’re already in debt you won’t be painting the town red anyway). And always be aware that what you post on social networks could be seen by someone else, perhaps even a debt collector or, in the future, a credit agency.
Alongside dubious photos and drunken boasts you should keep your financial dealings away from social media. A dodgy photo might get you sacked; in the future a dodgy tweet might mean your credit card application is turned down.
“Experian has no plans to do this in the UK but the advice on protecting the data you share via social networks will help fight ID fraud”