Facebook affecting your credit score

Posted by Simon Hadley in Credit Score on 2 September 2013 - Simon is a Credit Analyst at checkmyfile.

Start-up lenders worldwide are now beginning to use Facebook as a way of checking an applicants' creditworthiness.

Traditional lenders determine an applicant’s credit score primarily through examination of payment history, but start-ups, such as Lenddo, are using customers' Facebook accounts to see if any of their online “friends” are in financial difficulties or are registered with the website, hindering their application for a loan or mortgage.

Lenddo, which refers to itself as a “trust-based lender,” and currently operates in the Philippines, Columbia and Mexico, was established to “leverage the data in social networks,” while unrelated German-based company Kreditech now uses a person's computer location, as well as online data searches, to determine an applicant’s suitability for borrowing.

"It turns out humans are really good at knowing who is trustworthy and reliable in their community," says Jeff Stewart of Lenddo. “What's new is that we're now able to measure through massive computing power.”

Meanwhile, Kabbage, an online service that offers cash advances to small businesses, gives its customers the option to link up their social-media accounts to the website. “The small businesses that do are 20% less likely to be delinquent on their loans,” says Marc Gorlin, Kabbage's chairman and co-founder.

With more lenders looking to launch in the UK by the year-end, credit-conscious Facebook users might need to limit the amount of public information their Facebook account has to offer.

Simon Hadley is a Credit Analyst at checkmyfile and has a degree in journalism from University College Falmouth. He can be contacted at simon hadley@checkmyfile.com.

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