How Deadbeat Facebook Friends and Using ALL-CAPS Can Lower Your Credit Score 362
McGruber writes "CNN has the news that some financial lending companies claim that Facebook social connections can be a good indicator of a person's creditworthiness. One company determines if you are friends with someone who was late paying back a loan; if so, that is bad news for you. It is even worse news if the delinquent friend is someone you frequently interact with. Another company gathers information from the manner in which a customer fills out the online loan application. The chances of getting a loan improve if you spend time reading information about the loan on their website. Conversely, if you fill out the application typing in all-caps (or with no caps), you are knocked down a couple pegs in that company's eyes. A third lender requires that small business borrowers grant them access to the borrowers' PayPal, eBay and other online payment accounts (what could possibly go wrong with that?), thereby disclosing real-time sales and delivery information."
Kind of a warning sign actually (Score:5, Insightful)
If your bank carries that much stock in Facebook "friends" you may want to consider borrowing from a different bank.
Kind of like employers who want your twitter password, just maintain eye contact and slowly back out the way you came in.
Dubious Credit Criteria (Score:5, Insightful)
Dubious credit criteria and validation got us into a huge subprime mortgage mess and contributed to an economic downturn. Fortunately, this method doesn't appear to be widespread, but the same principle applies. Folks haven't learned the lessons of the last 100+ years and seem doomed to repeat the outcomes.
Facebook is the most expensive free service ever (Score:5, Insightful)
I think the wider story here is (Score:5, Insightful)
How using Facebook at all can bring harm to you in real life.
Case in point: a colleague's teenage daughter applied for a summer job at the local supermarket, got selected and went to a job interview. The interviewer asked her to "describe herself". She did, and the interviewer then said "that's not what your Facebook says. Thank you, we'll call you." She's only 16 and she wasn't doing anything particularly public or outrageous on Facebook. It hit her hard and my colleague says she's been kind of depressed by the rejection she's faced.
As for me, I've learned the hard way 13 years ago (before Facebook but after Google) that the internet never forgets, and whatever you say will come back to haunt you eventually. As a result, I've learned to shut my trap online whenever possible.
Re:Kind of a warning sign actually (Score:5, Insightful)
The problem is, how do you know whether the bank even uses that as a metric?
Re:I think the wider story here is (Score:5, Insightful)
She should look on the bright side. She would not have enjoyed working in an environment that stalks her Facebook profile and makes snap judgements without explanations. This is especially true for a PT job at a supermarket.
Re:Dubious Credit Criteria (Score:3, Insightful)
No, the problem was that lenders ignored any criteria. They didn't examine entrails before making a loan. They did nothing. Some (e.g. Countrywide) encouraged people to lie on their applications. These were applications for loans from them. They bundled and sold these loans to hapless buyers thanks to incompetent or negligent rating agencies (e.g. S&P) giving these bundles inflated ratings. That's why they didn't care about your worthiness. Read Michael Lewis's book "The Big Short". In this case somebody may be doing a big data study and finding correlations between these seemingly unrelated activities and you creditworthiness. Now correlation != causation, but businesses rarely bother to distinguish between the two.
Re:Kind of a warning sign actually (Score:0, Insightful)
Deal with it.
How about you stop being a sanctimonious wanker, eh?
Re:Kind of a warning sign actually (Score:5, Insightful)
Look at your list of Facebook friends if you use it. How many of them have anything to do with your credit worthiness or do you have any idea about their financial lives?
Do you have any high school friends on there? A friend you knew when you were 14 who was cool then but has since become a dead beat? You both share a hobby that you shared at 14 so still talk about that a lot and you should be dinged for his bad decisions?
You have a couple of brothers/cousins/family members who have made horrible financial decisions and declared bankruptcy a couple of times. You have done everything right and are responsible financially and so you are penalized for that?
You join a club quilting club with a FB page and meet a bunch of people and several of them that are active quilters are doing so while foreclosing on their homes and so you deny me a loan?
If the company has no financial information to go off, maybe I can see this being valid, but still a stretch. If you read the article, this company operates in the Philippines, Mexico and I forget the last country. Places where they have very little information to go off so thy use what they can. Judged by the company you keep on FB is ludicrous.
Re:Kind of a warning sign actually (Score:4, Insightful)
"Credit scores based on your actual credit history are far more reliable."
The banks agree completely. This Facebook thing is specifically intended for applicants who don't have any credit history.
Re:Kind of a warning sign actually (Score:4, Insightful)
To be clear, if you are in the US your FICO 'credit score' does not contain this kind of stuff. That score is made up of your available credit, repayment history, etc. The 'credit agencies' you refer to are not the agencies that give the FICO score. They are companies that try to determine an applicants creditworthiness in places that don't have the equivalent of FICO scores.
Re:Kind of a warning sign actually (Score:5, Insightful)
"Credit scores based on your actual credit history are far more reliable."
The banks agree completely. This Facebook thing is specifically intended for applicants who don't have any credit history.
OK, so either Ralph Wiggam has never heard the term "scope creep," or he works for one of the banks/credit reporting agencies, and therefore has a vested interest in demonizing anyone who points out how fucked up this practice is.
Then again, this is a person who chose to name themselves after a (literally) mentally retarded cartoon character from one of the crappiest shows on TV today...
Re:Kind of a warning sign actually (Score:5, Insightful)
If the company has no financial information to go off, maybe I can see this being valid,
Yup, that's exactly the point of the article which you read.
If I don't have proof whether you're responsible with money, but I do know that you are currently active friends with a deadbeat, your family members are likely highly supportive of you declaring bankruptcy, and your social circle has disproportionally high foreclosure levels, you look like a risk. Short of monitoring your conversations to ensure that you're not discussing anything financial with them, I have to assume that you rub off on them, and they rub off on you. And even if I know good things about you, which rubs off on them positively, this still takes you down a notch, because if you fall on hard times, you don't seem to have a network that will push to help you make your payments, unlike the guy whose friends and family all have stellar credit histories.
That's always the pain of statistical models: someone's an exception. But lenders aren't venture capitalists; nobody's going to pay them back 10x their investment. So they minimize risk. The bank insists on 20% down for the best mortgage rates; the payday lender charges you $45 upfront for the $300 loan. In the absence of personal relationships that establish information and trust, everybody tries to protect their bottom line. Makes sense to me.
Re:Kind of a warning sign actually (Score:5, Insightful)
Using someone's skin color as a factor in whether you grant them credit would also be statistically relevant and improve profit. We don't permit it, for a very good reason.
Only in the modern era has it become possible to discriminate based on so many other criteria as easily as based on race. If someone walked into a loan office, their race was normally visible. But whether they were a Star Trek fan or whether they're in a knitting circle with a deadbeat wasn't, and it wouldn't be worth the lender's effort to find out.
"Deal with it." Seriously? (Score:5, Insightful)
You are judged by the company you keep. Deal with it.
If we had just "dealt with it" every time those with power abused their position, black people would still be slaves, women would still not have the vote, children would still be down in the mines, and manual labourers would still barely earn enough wages to live while working crazy hours under conditions that would seriously damage their health.
We have a long way to go, even in the first world, in terms of respecting each other as human beings. We aren't going to get much further if we adopt your attitude every time essential services that make society work start taking advantage of asymmetric power relationships with the ultimate goal of making more money no matter what.
Re:Kind of a warning sign actually (Score:5, Insightful)
What happens when someone else uses your real name maliciously to intentionally associate with other accounts under names of people known to be criminals or bad credit risks, OR when your real name is very common, so there are are 50 facebook accounts with your same name?