Traditional methods for evaluating credit risk are tried and true and have been proven over time. They usually involve reviewing an applicant’s income, collateral, and of course, credit history and credit score. With the explosion of social media, more data is becoming available to credit issuers and some lenders are already either incorporating this data or are considering doing so as a normal part of issuing credit.
We always stand behind our belief that “Your credit profile is your resume to the financial community.” In light of new information which can be gathered from social media sites, we need to add a new twist “Your Social Media profile and activity may become part of your credit profile!”
Here is a scenario to consider. A lender may ask you to temporarily connect with them on a social media site. They may then gain access to data regarding certain check-ins and posts to review your spending patterns. This data could be used as a factor in whether or not the credit issuer may grant a loan request. Intrusive? You decide. Real? Yes.
Let’s say you’ve been living it up on an expensive all-inclusive vacation in some far away land, or buying everything in stock on your favorite retro clothes website. A potential lender may look at this behavior and consider it a negative factor in whether or not to make a loan for a new home or some other purchase. Think about it this way, much of our online activity in social media is very public so it’s fair game for everyone to see.
Not always done for the wrong reasons
Lenders as a whole want to make loans to qualified applicants who they feel will have a high likelihood to repay the loan. Some lenders are using social media groups and messaging to help customers stay on task with maintaining payment histories, borrowing responsibly, and educating themselves to become better consumers. Lenders may also decide to show their potential consumers ways to become more financially responsible through great content such as videos and e-books.
Gaining new customers in an increasingly digital world, is not always easy. Advertising and connecting with potential customers through social media allows lenders and sellers a way to offer special discounts and promote products and services people actually want to purchase.
Social Media has made the world a better place: for the most part!
If you take only one thing from this article, it’s this: social media has changed our landscape forever, and for the most part it’s a fantastic use of technology. It’s the “Facebook vs. yearbook” comparison that’s been well discussed. Would you rather pull out a dusty old yearbook and look at what someone has written in purple pen years ago, or reach out to them instantly and truly connect with them? The answer is obvious. But just keep in mind, lenders who are considering offering you a loan can use social media to give them more insight into your spending and saving habits, so be careful what you post out there!