Facebook posts could give valuable information to credit companies
PORTLAND, Ore. -- You may be excited about buying a new car, and you might post the news on your Facebook page. But that kind of post could end up costing you money down the road.
Lending companies are starting to see social media as a possible source of information about your credit.
One company, Lenddo, tells customers on its website that it will look at number of their friends online, the quality of their online friends, and the strength of their digital connections with those friends.
The company said it currently offers loans in the Philippines and Colombia only. But the trend of companies seeing value in your social media for credit information has spread to the United States as well.
The idea of mixing social media and credit does not make some internet users in Portland happy.
"I don't think it's a legit way of doing it, so I'm not in favor of it," said Kenny, who did not give his last name. "Thumbs down, one hundred percent."
"I think it's just another intrusive aspect of the commercial financial system, trying to get into my business," said Marlene, who chose not to give her last name.
Lenddo said its goal is to help people in countries where there is not easy access to credit, like the Philippines and Colombia, providing micro-loans for people to better their lives.
A company spokesperson said its model of analyzing social relationships is akin to the days before credit scores, when bankers made loans based on a person's reputation in his or her community. He said customers opt in, choosing to share their social media information in order to get a loan.
Some are concerned this kind of model would not be successful in the United States.
"I don't think a lot of consumers out there are going to be too keen on the idea," said Mary Monroy, credit counselor for ClearPoint Credit Counseling Solutions in Beaverton. "How do we know how accurate those social media profiles are right now? And how can a lender?"
Facebook user Stef Simmons agreed.
"Personally, I come across a lot more immature on my social media than I actually financially am," said Simmons. "I'm incredibly responsible financially, but hang out with me and you might not think that."
But Lenddo said the data works, allowing the company to connect social media and credit.
If the trend becomes widespread in the U.S., credit experts like John Ulzheimer say people will need to pay more attention to what they post and how.
For example, posting about buying a new car or refrigerator, or about putting you entire vacation on your credit card, could help you lose a loan.
"It's taking on new debt," said Ulzheimer. "Consumers who have taken on new debt are riskier than consumer who have not taken on new debt."
Posting about looking for a new job or losing your job could tell a lender that you may not have the steady income they want to see.
And your online friends' behavior could affect you, too. Ulzheimer said lenders may follow the theory that "birds of a feather flock together."
"Then perhaps you are risky because you are socializing with others who are risky as well," said Ulzheimer.
At some point, you might need to choose between dropping friends, or dropping your credit score.
Monroy acknowledged that social media-based micro-loans could work for people in developing countries. But she said that people in the U.S. should work on improving their credit history, instead of opting in to a similar system.
"I would say there are other ways to increase your credit score quicker and more effectively," said Monroy. "I don't think, with social media, that's the best way to prove that or show it."
She recommended people try a non-profit credit counseling service to help them if they have any difficulty with credit or budgeting.
It can be hard to tell if companies in the U.S. are reviewing your social media to determine your credit-worthiness.
Multiple reports said a California-based company called LendUp used social media. A company spokesperson told KATU that the company does not currently use social media for that purpose, but stopped answering questions when asked about whether the company has used it in the past.