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الأربعاء، 8 فبراير 2017

We Heard Social Media Can Affect Your Credit Score. Here’s the Truth

I recently saw headlines floating around telling me lenders might check my social profiles to judge my creditworthiness and borrowing power — even my internet search history.

As a 24-year-old who used social media throughout high school and college, this information incited panic.

I can’t say I’ve never drunk tweeted. And lord knows the crazy stuff I’ve searched — especially as a researcher and writer.

But I have healthy finances and good credit. I only had one hiccup with a rogue medical bill.

Could my social media usage really ruin that?

In all transparency, when I set out to write this article, I had every intention of writing a similar headline and firing warning shots: Penny Hoarders, stop posting drunk photos and Google-searching payday loans. It could hurt your credit worthiness.

However, I started digging deeper about what affects your credit score. I found similar information and headlines dating back to 2015 — and one CEO who was horribly quoted.

Spoiler alert: My view totally changed.

What’s Being Said about Social Media Influencing Your Creditworthiness

Back in late 2015, a bunch of news outlets quoted FICO’s CEO Will Lansing as telling the Financial Times:

“If you look at how many times a person says ‘wasted’ in their profile, it has some value in predicting whether they’re going to repay their debt. It’s not much, but it’s more than zero.”

News outlets picked up his quote and reported vigorously on it, including the article I recently saw on U.K.-based Totally Money.

In addition, that article stated: “An increasing number of companies — especially start-ups in the past five years — are adding to their client’s information banks directly from their phone records, internet history and even their choice of friends.”

It also reported internet searches could influence consumers’ creditworthiness. So if you’ve been searching “payday loans,” for example, your “social credit score” could drop.

However, I can’t trace these claims back to any concrete piece of information.

And when I researched “social credit score” and similar concepts, I stumbled upon a completely different practice.

So What is a Social Credit Score?

I can tell you it’s not necessarily using consumers’ social media accounts to make judgements.

I can also tell you the term isn’t new. In fact, much of the information I found on the matter was reported last year — and even earlier.

Totally Money does note that lending companies are implementing these scoring tactics in certain regions of Africa. 

However, these are more aptly called “social reputation scores,” BBC reported.

Nigeria’s Social Lender, a micro-loan facility, uses an algorithm to assign a “social reputation score” to individuals, according to BBC. The goal of this program isn’t to hurt a borrower’s creditworthiness — but to help those with little credit history.

In China, there is something unfurling called a social credit score, which Totally Money also noted. However, this doesn’t mean assigning credit scores to individuals based on social media content.

Rather, the Wall Street Journal defines it as a system China’s government plans to implement by 2020 “to track individual behavior and assign ratings to citizens.”

Basically, this system combines financial and social behavior to generate a score.

“A person can incur black marks for infractions such as fare cheating, jaywalking and violating family-planning rules,” the Wall Street Journal reported.

The score is then used to help make consumer decisions, “such as who gets loans, or faster treatment at government offices or access to luxury hotels,” the Wall Street Journal continued.

So are these systems coming to the U.S.?

Short answer: No.

But There are New Credit-Scoring Systems Being Issued in the U.S.

Remember how FICO CEO Will Lansing said being “wasted” on social media could hurt your borrowing power?

He really did say that, and it really does sound like your photos and status updates could hurt your credit.

But, NPR clarified what Lansing meant back in 2015. It quoted FICO spokeswoman Christina Goethe who said:

“The headline about social media posts created a misperception. FICO is not utilizing Facebook data, or any other type of social media data, in calculating FICO Scores. Mr. Lansing was talking generally about the fact that different types of data have different levels of predictive value.”

Basically, Lansing was using “being wasted” as a bad example (my opinion) to talk about the new scoring system FICO really had planned.

Back in October 2015, Forbes reported about this new (at that time) credit-scoring system called FICO XD.

It’s similar to what companies are trying out in Africa — scoring individuals in other, nontraditional ways.

The new score is FICO’s way of helping U.S. consumers who don’t meet the standard credit scoring requirements due to “insufficient or stale data in traditional credit bureau files,” according to FICO’s website.

In other words, the less-traditional method helps those who don’t have any traditional credit-scoring data. Instead, individuals are scored based on other elements, such as phone and utility bills, property and public records.

Nearly 26 million Americans have zero credit history, according to a 2015 Consumer Financial Protection Bureau report. So this XD score aims to help those folks.

TransUnion and Experian, the other big credit-scoring companies, have been working on new ways to assess consumers, too.

TransUnion now has something called CreditVision Link Risk Score, which includes property, tax and deed records, checking or debit account and payday lending information, among other insights, NPR reports.

Experian also includes rental data.

Will Social Media Ever Influence Our Creditworthiness Here in the U.S.?

Never say never.

Some online lending startups believe in social media-influenced scores.

Back in 2013, the Wall Street Journal wrote about Lenddo Ltd. and its co-founder Jeff Stewart.

“Mr. Stewart is part of a growing group of entrepreneurs who believe that online reputations can tell lenders more about a person’s trustworthiness than the FICO score…” the article states.

As of April 2016, the Hong Kong company is in 20 developing countries and “makes small loans for ‘life-improving’ purposes such as education, medical emergencies and home improvement,” the Wall Street Journal reported.

But will the practice come to the U.S.? Will Experian, Equifax or TransUnion adopt these practices?

First off, you’d have to be willing to let the lending company access your Facebook and other social media accounts, the chief executive of Swedish online payment company Klarna AB Sebastian Siemiatkowski told the Wall Street Journal back in 2013.

Second, FICO was, at the time, skeptical about the value of adding social media to credit reporting.

FICO public relations director Anthony Sprauve told the Wall Street Journal it didn’t have plans to use social data. He said he wasn’t too sure how one’s Facebook friends list could determine anything about creditworthiness.

Plus, We Have Laws That Help Protect Your Privacy…

NPR brought up a great point.

The U.S. has this piece of legislation called the Fair Credit Reporting Act, which “promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies,” according to the Federal Trade Commission.

Under this, you have the right to know if information has been used against you and what reporting agency that information came from. You also have the right to know what’s in your file.

And if you think information is inaccurate or unfair, you have the right to dispute that.

When Your Social Media Profile Can Be Used Against You

Unfortunately, the Fair Credit Reporting Act doesn’t cover every institution.

Banks, employers, property owners or insurers aren’t included, according to NPR. But these are overseen by other standards — like fair housing laws.

If you’re really that worried, take action for yourself.

First, know your rights, and do your research on what is actually affecting your credit score.

Second, be smart about what you post on social media, and make use of your platforms’ privacy settings when posting.

To address the whole search issue thing, check your preferred browser’s privacy settings. You can even opt to use a private, incognito window. There’s also a new(er) search engine called DuckDuckGo, which supposedly doesn’t track you.

Your Turn: Do you think your social media presence should influence your ability to borrow money?

Carson Kohler (@CarsonKohler) is a junior writer at The Penny Hoarder. She once drunk tweeted at 3 a.m. to tell her social world about an attractive Jimmy John’s delivery guy.

The post We Heard Social Media Can Affect Your Credit Score. Here’s the Truth appeared first on The Penny Hoarder.



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