Friday, 24 January 2014

How social media can affect your credit rating

A preparation to analyse data mining of social-networking sites funded by Germany's major credit-reporting agency elicited fury after internal documents on the project were leaked to German media channels.

Spiegel Online stated that data collected from Facebook, LinkedIn, Twitter, Google Street View and a number of other social networks could be utilized for "identifying and assessing the projections and threats" as well as determining "the existing opinions of a person."




In recent years, on the other hand, the uses of social media have developed. It's not just a means of expressing yourself; staying connected with family and colleagues and marketing your small business any more. It has also become a tool for employers to check on your professional and personal credibility. To express yourself freely with strong opinions on political, economic and social issues as well as posting pictures of your weekend out with friends could end up being used by your prospective employer to determine whether you will be chosen for the job you applied for or not.

As silly as it sounds — employers visiting prospective employees' Facebook accounts — there are far more insane disadvantages that come with using social media sites. Top in the list of these disadvantages is identity theft, followed by credit card scams, fraud, and other types of scams which usually happen to people who are unlucky enough to find themselves on the wrong side of online data violations and hacking.


Long-established credit score models look at usual signs of creditworthiness that include length of employment, past payment history and the salary. Now, a new credit scoring method is stepping ahead of the status quo and looking into an applicant’s social media account. Did you forgetfully or out of ignorance decide not to use capital letters for some proper nouns? If so, you drop a few points. Are you an all-caps sort of guy? That's another few points out.

Sounds frightening? Both politicians and common Germans thought so too, and there was a civic outcry. German credit agency Schufa insists that the project was done within the range of German privacy laws, yet the backlash incited the university it authorized to conduct the study to yield out of what was supposedly a three-year project, and the credit agency announced that it wouldn't follow the initiative.

Privacy experts declare this is a shot across the bow. Paul Stephens, executive of policy and advocacy at the Privacy Rights Clearinghouse said that social-media data represents a potential trouble in lots of situations.

Although I recognize that Lenddo and the other companies cited in the CNNMoney.com article are supplying credit to individuals and smaller businesses that can't reach funds through traditional resources, ransacking over a social media profile to conclude creditworthiness is a bit disturbing.

Even though the German venture was stopped shortly after its start, a mixture of factors makes it improbable that this swift retreat will stop the broader privacy war over the said issue. For one thing, there's just too much cash to be made: credit collections and reporting is a $20 billion business. The American privacy laws are in addition much more lenient when compared to those of European nations. Most imperative, the data is there for the claiming: Americans are disturbingly offhand about what they post online and how much data they expose to the general public.

One such company is financing company Kabbage, which gets information from companies' online payment accounts including PayPal and eBay accounts to know credit worthiness, and also transfer loan money in seconds, according to FBN.


It's also significant to specify that according to Randy Padawer, vice president of credit repair services at LexingtonLaw.com, these companies are supposedly looking at customers overseas in the Philippines, Mexico and Colombia, rather than in the US. In this case, those who have recognized credit histories won't be considered for this kind of monitoring.

He said that a well-established payment account is the best predictor of potential payment history. Despite the fact that Lenndo has detached a statistical correlation between who an individual's friends are, and their credit histories, that will never be as a strong predictor.

Padawer also said that definite subprime lenders who now have great difficulty now predicting who will be in a position to pay back any money lent to them prior to lending from a group that is under depository may find it helpful to have any metric that can assist predict credibility. However, if you have a normal credit score — it won't be an issue who your Facebook friends are.

Even as it may be against the law to utilize this information to ruthlessly settle on lending guidelines, Detweiler says it doesn't mean to say that it isn't going to happen. Consumers should be careful with what they post online, as private data can effortlessly become public knowledge on social media.

She said that as consumers, you have to be very vigilant because if someone is not legitimately using that data, it doesn't imply that they aren't illegally using it. Your local bank, your debt collector or your landlord could notice what you are posting on Facebook, and they may choose to use that information against you. They may not have the grounds to use it legally, but there will definitely be many ways that they can use this information.

How much of a danger are you in if you go about venting about a speeding ticket or liking/following every bar in your town? To figure this out is an attention-grabbing academic riddle. It is also the Holy Grail for some digital-marketing companies, credit agencies and other platforms that gather and organise consumer information — and it could harm consumers.

As recommended by the CEO of a payment processing service namely WePay, checking and examining social data might be more cost-effective and more precise in determining one's individual history or in determining whether a specific business is lawful or not (mostly because of Twitter's and Facebook's time lines). What would possible employers, banks, lenders, and credit card companies be looking after? The videos and photos you post, together with your general behaviour to a particular bank, Credit Company or utility company could all be probable factors in assessing your social media reputation.