Credit scores aren't the only metric banks look at these days, Facebook friends provide important data for lenders. PHOTO: Andrew Jameson
Facebook friends with bad credit can lower your creditworthiness and cause your loan to get rejected, a phenomenon we all should have seen coming under the larger heading of the rise of big data. While lenders still look at your credit rating, which is based on your own history of taking out and repaying loans, research has found that your Facebook friends’ credit history suggests how well you will do with your loan.
And of course, the data mining extends beyond Facebook. Facebook is simply the largest source of social network data, but lenders are also looking at Twitter, eBay and Amazon as indications for a potential borrower’s financial clout and how likely they are to pay back a loan.
While traditional lenders, like big banks, still rely mostly on your own credit scores and not your friends, tech startups are getting more adept at data mining. Lenddo, a startup lending company, uses Facebook connections as one indicator of a borrower’s creditworthiness.
"It turns out humans are really good at knowing who is trustworthy and reliable in their community," Jeff Stewart, CEO of Lenddo. "What's new is that we're now able to measure through massive computing power."
Stewart ignores in that quote that people don’t always base their Facebook friends on who they think would pay back a loan, but it’s not a surprise that there is enough correlation among Facebook friends in economic status and personality types that it makes sense that likeliness to pay back a loan would correlate as well.
Still, it’s kind of a bummer that people will start to shape their Facebook personality based on what looks good to a bank.