Did you know that what you share online could affect whether or not a bank decides to issue you a credit card or loan? It’s true! Just check out this excellent article from Erica Sandberg at CreditCard.com. In the article, Erica talks with San Francisco-based company, RapLeaf, which employs social media monitoring to create customer profiles called “social graphs” for clients. According to the article,
“These graphs provide companies with insight into behavior patterns: what you like and dislike, want and don’t want, do well and do poorly. Pretty much everything you and your network reveal may be compiled, including status updates, “tweets,” joining online clubs, linking a Web site or posting a comment on a blog or news Web site.”
In part, this social media profiling is done to help companies better market their products. In that sense, it’s no different than other form of consumer research. For banking and financial institutions, however, it’s also used to identify the potential risk attached to certain customers. More often than not, banks say, the social profile is a good thing that helps people get loans approved more quickly.
Social graphs allow credit issuers to know if you’re connected to a community of great credit customers. Creditors can see if people in your network have accounts with them, and are free to look at how they are handling those accounts.
The presumption is that if those in your network are responsible cardholders, there is a better chance you will be, too. So, if a bank is on the fence about whether to extend you credit, you may become eligible if those in your network are good credit customers.
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Having a robust online social network can also expedite loan acceptance. “When people have large networks, they get funded two to three times faster than without,” says Garcia. Why? “We notice that good credit people invite good credit people; bad invite bad.”
However, not everyone agrees that your circle of friends online should have such an important role in determining your credit worthiness.
“It’s difficult to make a judgment about an individual’s credit based on the people around them,” says Gregory Meyer, community relations manager for Meriwest Credit Union in San Jose, Calif. Meriwest only assesses credit report and application data to make lending decisions. “[Social media] is a great way to keep up with what my 10-year-old nephew is up to, but it doesn’t have a place in the credit process.”
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Linda Sherry, spokeswoman for consumer advocacy organization Consumer Action, accepts that social media data could help with marketing, but doubts its efficacy in risk management. “When you get outside of a personal credit report, it doesn’t seem like social graphs would help anyone,” says Sherry…”It’s rotten. It’s really not something they should be doing. They may be gaining information from people who are naive and not understanding how their profiles are set. It verges on privacy violation.”
In a recent guest post for ZDNet, Reputation.com CEO looked forward to 2010. One of his predictions was that, “2010 is the year of the online reputation score. The death knell has sounded on old-school credit scoring, which is seen as both data poor and outdated. The race for the new, more useful score is on.” In light of Ms. Sandberg’s excellent article, I believe we can say that this prediction is rapidly becoming a reality for all Internet users, if it isn’t already.
Everything you do online can have an effect on your life, whether you like it or not. There are two ways to accept this: One, you can hole up in a cave and swear off the web for the rest of your life (which is probably equally bad for your credit), or two, you can choose to proactively manage your reputation online, control your Google results, and promote the things that you want to promote about yourself. In case you were wondering, we recommend option number two. It takes a lot of work, but that’s why we’re here to help.
To find out more about how to get started on managing your good name online, give us a call at 877-720-6488 or use the contact form on our website. We’ve helped thousands of men and women from over 40 different countries around the world, and we can help you too.
3 comments ↓
1984
CRA, the Community Reinvestment Act, was created because banks were granting credit based upon how loans were managed in a neighborhood or community. “If we make a loan in a low income area, it will not be repaid.” was the thought process in the 50’s and 60’s.
Borrowers were not being judged based upon their personal ability to pay or their abiltiy to manage their personal credit, they were judged as a group against others in their neighborhood. This is a discriminatory practice just like judging someone’s ability to repay a loan based upon their friends in Facebook or the twits following them on Twitter.
The old practice of credit labeling by group was put to rest by the Community Reinvestment Act in the mid 70’s. This forced lenders to make credit judgements based on the individual’s ability to pay and manage credit, not on the affiliations of a group or community. I don’t see any reason for these policies to change because of social networking.
Thanks for the comment Greg. You raise an interesting point. I wonder if the government might not seek to curb the practice of social media monitoring by banks and creditors just as they are now attempting to curb data mining by search engines and other Internet companies.
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