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."
Affinity Group Lending (Score:5, Interesting)
I keep some of my savings at Lending Club [lendingclub.com], which originally started out as a Facebook-based microlending platform -- the idea was that if you knew the people you were lending to, or at least understood their social graph, that you'd make better lending decisions. They dropped the concept a few years ago, my guess is that it didn't scale and there were practical difficulties. (I could see issues arising from sockpuppetry and slander, among other things...)
They do still loan to individuals, and when you lend you read their application, you can see where they live, their FICO, and what they plan to do with the money. And, guilty as charged, I never lend to people to do their application in ALL CAPS :)
Re:Kind of a warning sign actually (Score:5, Interesting)
why?
a few decades ago banks would ask you for character references when you applied for a loan. cheap computing tech gave rise to credit scores
Re:Kind of a warning sign actually (Score:2, Interesting)
There was a much better article [economist.com] about this in the Economist a few months back. The banks don't ask you for a list of your Facebook friends. It doesn't work like that. They get the information as part of your score from credit agencies. You will never even know it is happening. But I don't see why this is worse than other things they consider, like your zipcode or marital status. You are judged by the company you keep. Deal with it.
The big question is, when you have your privacy settings turned up do credit agencies still have a way to get your data? And less importantly, if they do turn up empty handed, do they use that against you with equal weight as being "friends" with deadbeats? In other words, is having a well-manicured facebook page now akin to having a cheap car loan (in good standing) on your credit record, to ensure you get a good rate?
Re:Dubious Credit Criteria (Score:4, Interesting)
Because correlation does not equal causation.
I will present proof by contradiction. The assumption to be disproven: My friends are all creditworthy if I am creditworthy.
As a creditworthy person, I have a good job and always repay loans well in advance. I am responsible with my money. This allows me to volunteer where college students and other people who are not as well off frequent.
In turn, I'm friends with many of them on Facebook. Contradiction!
Re:Kind of a warning sign actually (Score:5, Interesting)
Of course they still get that data, how do you think Facebook makes any money?
Re:Kind of a warning sign actually (Score:5, Interesting)
"Easy. How would they know who my facebook friends are?"
They _buy_ that info from FB, remember, you are the product, they are the client.
Re:Kind of a warning sign actually (Score:4, Interesting)
Aside from the obvious issues of reliably associating accounts to people whom are unable to question the association, selling information on their communications and social arrangements with others without their consent and knowledge, while making reliable inferences that defy the natural law of inferences (even when the evidence is rock solid, your error rate can only go up).
Let me give you a clue as to what this story is about.
We have gotten to the point in our civilization where we have leveraged and financialized our lives, society and government to such a degree that we have ran out of actual valuable collateral; things like cars, houses, jobs, businesses, etc; and are now attempting to collateralize abstract things like social contacts.
Meaning, instead of making loans to people who have the actual ability (Job, Investments) or Collateral (Car, House, Boat, Business) to pay, we are instead loaning money (perhaps borrowed money) out to people based upon what amounts to merely their social status because either people have too much debt already or are unwilling in this economic environment (for a variety of factors) are unable to imagine a new scenario in which taking on new debt produces value. Taking out a loan to buy a machine that produces pizza 10x as fast only makes sense if you're the first to do it, if you're the last to do it and take out a loan to do it, chances are you are taking on debt just to stay competitive. When everyone does that with everything, you get the mess that is today.
We're flat out of suckers to keep the ponzi-economy of ever increasing cycles of debt being spent on ever less value afloat and the monstrosities at the top of the pyramid are trying anything to keep the game afloat because they have the most to lose from the collapse; namely their lives, fortunes, status and egos.
This has nothing to do with being judged by the company you keep and everything to do with handing out loans based upon flimsy circumstance (When did Loaning money to Medieval Monarchs Ever work? There's historic precedence for this).
Re:Kind of a warning sign actually (Score:5, Interesting)
I don't know why I'm surprised at how little consumer protection there is in the US any more. In the UK credit agencies are regulated and can't just use any information they can lay their hands on. You can add your own notes or get it corrected too.
One thing that is specifically forbidden to be used is who you associate with or who you are related to. That's how we "dealt with it".
Re:Kind of a warning sign actually (Score:5, Interesting)
That's always the pain of statistical models: someone's an exception.
And in the case where someone is an exception and can prove that their associations are the cause of being denied a loan or a job or in any way effecting an individual's credit, here comes the lawsuit. You cannot legally be denied employment and your creditworthiness cannot be effected by your associations. This would have far-reaching discriminatory consequences with regard to race, religion, financial 'class', etc. and ultimately force people to cut off others in their life who were not 'reliable'.
Setting this precedent allows a true class-style system to be introduced whereby unless you are in the 'reliable' category, it is almost impossible to become 'reliable' because 'reliable' people won't associate with you or give you jobs. People would potentially be forced to ostracize family or friends from their realm in society for fear of being dubbed 'unreliable'. This sounds eerily like Gattaca except with financial systems instead of genetics (I know that a better reference is Huxley or possibly even McCarthy in some ways but I just watched Gattaca again a few days ago and it is fresh in my mind).
Re:Kind of a warning sign actually (Score:5, Interesting)
We are already there. Case in point - my wife and I. My family is poor, my mom's already had one bankruptcy, and I now make more than the rest of my family DOUBLED. My wife comes from a solid middle class family, both her mom and her dad have 50K credit cards (real Platinum-class cards back then). She and I married, moved in together, and after a few years started to get credit cards. I got a $300 credit line, she got 5K. My second card eventually got approved, $500. Her second? Over $4000. At this point she has $12k in credit and I have around $4. The only one with a job is me - when she got her cards she was working part-time in a book store making 8.50/hour, prior to that she was in college. I was making 50k a year as a computer programmer.
I got saddled with my family's credit "worthiness" and she benefited from her family's. I *still* cannot get as much credit as she can, even though we've been married for 13 years, my name is on the mortgage, the car loans (one already paid off), and I'm still the only one with a job (she's a stay at home mom), but she keeps getting the card offers in the mail and I don't. So, yes, we are ALREADY in a class-style system for credit.
Re:Kind of a warning sign actually (Score:5, Interesting)
I love how people think "privacy settings" mean jack to a company that makes money selling personal data.
Re:Kind of a warning sign actually (Score:4, Interesting)
This kind of thing does happen, so it is important to be transparent so that the issue can be easily appealed and the loan reviewed.
Well; the problem with that is anyone can disavow the legitimacy of their own FB account. Furthermore; they can't possibly meet the FCRA requirements of disclosing all the pertinent information --- they have to disclose it, BUT if they tell you that Person X your "friend on Facebook" is a deadbeat, then the CRA has just broken the law by providing you private data about someone else's finances.