How your Facebook profile affects your credit score
Yet another reason to check your privacy settings...
Breaking News – What you share on social media is fair game for companies and advertisers. Oh wait, that isn't breaking news at all. What you post on Facebook, Twitter, Instagram, Tumblr, or any other social media outlets is fair game for anyone who wants to collect it. Your data exists online forever. What data is that? Personal things you share with family and friends, ill-conceived screeds at 2AM directed at a less-than-average drive-thru attendant, thoughts and opinions you believed were only posted in a specific space and seen by a specific audience. This data can be accessed and assessed by advertisers looking to sell to you, employers looking to filter out applicants, and now – lenders you're wanting to borrow money from.
Why do lenders care?
Lenders have never been particularly open about the way they evaluate applications, even more so when they might be using less-traditional methods of judging you. Big data is the term to know here.
But what is big data?
Big data refers to exactly what it sounds like it would, large quantities of data, so large that traditional software struggles to process and store it. Our modern day obsession with documenting every part of our lives has contributed to the availability of big data, especially when it comes to personal information.
Banks have admitted to accessing big data in order to more effectively market their products. For example, Westpac uses big data for their 'Know Me' program, which has contributed more than $22 million to their bottom line as of February 2015. Westpac's Head of CRM and Digital, Karen Ganschow, spoke of Westpac's use of big data at the Gartner Business Intelligence and Information Management Summit in Sydney, and said,
Data helps us form a picture of the customer’s life journey and the next step they will take
While marketing is one thing, using that same data to help determine your eligibility for a loan is quite another.
Are lenders checking your Facebook when you apply?
In the US, some lenders are quite open about using big data to help inform their lending decisions. While it's still a new phenomenon, it is happening. What about here in Australia? In Australia, lenders are less open. Non-traditional lenders such as K24 (a division of German company Kreditech) use big data to score applicants, drawing on over 15,000 data points to score anyone who applies.
Peer-to-peer lenders, who are providing an innovative alternative financing option for Australian borrowers, are also delving into big data. Australian peer-to-peer lenders such as Society One and Direct Money have incorporated big data into their scoring systems, with Society One using that data to develop full credit profiles for borrowers and personalised rates.
Is there any way to know if lenders are checking my social profiles?
In terms of checking Facebook, it's difficult to say. Some lenders give you the option of logging in with your Facebook details in order to help your application. Others look through your publicly available social profiles to ensure the accuracy of your application. It's been reported that some lenders delve more deeply into your profile to see who you associate with, where you go on holidays, where you work and how you spend your free time in order to assess your viability as a borrower. The trouble is that it's difficult to determine exactly what the lender is looking at and how that information is being used.
What exactly are they looking at?
It's hard to pinpoint exactly what lenders are drawing on when they dive into the world of big data. Any or all of the below might be checked when you apply for loan with a lender who relies on big data checking:
- Where, when and how you access their website. Lenders can easily check your this by looking at:
- Your IP address (i.e. your location)
- The web browser you're using (e.g Google Chrome)
- How you came to be on the website (i.e. Organic search).
Even the time of day you seek a loan can have an influence on whether you get approved – Kreditech admits your score could change by the second. Using Google Analytics and other similar software is standard tracking for a website and can help online lenders increase their online performance and usability, but using this information in terms of individual users means they can also use it as factors in their lending decisions.
- What you do on the website. In 2013, a study was conducted on UK lender Wonga and the way they collected and used big data. One interesting insight that came from the study was that when users initially accessed Wonga's site, the adjustable calculator was set to different amounts based on various factors including their locations and browser. Another point of note is that the degree at which users slide the calculator on Wonga's site matters – Wonga say that people who go to the maximum straight off the bat are more likely to default.
- Your Facebook profile. Some lenders give you the option to connect via Facebook so they are able to learn more about you. By letting them login as a third-party app they are able to see personal information as well as what's posted on your wall, your news feed, your likes and your dislikes. In an ABC story, social media strategist Lauren Papworth suggests that banks could also be judging you based on your friends' behaviours.
Are there any positives?
There are myriad negative implications of lenders using big data, mainly that borrowers are unaware of the information being used. However, even stormy clouds can have silver linings. Some lenders are using the possibilities offered by big data to develop increasingly innovative lending strategies to give more people access to credit.
Positives for Aussie borrowers
In Australia, this has come in the form of peer-to-peer lending, which is a way for people to borrow from investors using a third-party facilitator. Many peer-to-peer lenders are creating more detailed classes of borrowers to offer varying rates based on your credit score – all thanks to how big data can let them see a fuller picture and help them make more responsible lending decisions. Most peer-to-peer lenders in Australia have also been quite upfront about their use of big data.
How it's affecting borrowers around the world
Overseas, lenders have gone a step further and have developed business models completely social-centric. Lenders like Lenddo, a Hong-Kong-based lender that has operations in the Philippines and Colombia, let customers link their social accounts in order to boost up their credit scores. US-based lender, LendUp, checks applications against social media data to ensure accuracy. They use this, among other metrics, to help borrowers build trust and move up their 'lending ladder' in order to secure lower rates.
Before you start deleting statuses and tweets...
Should you be worried about your bank checking your Facebook? The fact is that big data exists, and every piece of online information can contribute to a lower or even higher credit score in the eyes of the lender. While this is still a new phenomenon, there is really no reason to be deleting any profiles or checking if your latest friend request is a bank employee – although a quick review of your privacy settings couldn't hurt.