21st December 2011
But the catch is, it's not your account that may affect rankings, but your online friends.
Lenddo, a Hong Kong-based microlending startup, says it is "the first credit scoring service that uses your online social network to assess credit."
An article by Beta Beat tells of applying to Lenddo. It said they were first were asked to give their Facebook profile, then several other user names to online accounts, including gmail and Twitter. Finally, they were denied for not having enough friends with high credit scores.
But how does this work?
Lenddo uses a "proprietary and secret" algorithm to help determine credit scores and loan-worthiness, according to the company's CEO. It considers that "…if Lenddo sees one of your best Facebook buddies took out a loan and paid it back, there's a good chance you will too."
"We think that in the age of the internet you should be able to establish your reputation and your identity through your social graph, through your on- and offline community, and use that to get access to financial products and information," says CEO Jeff Stewart.
And if you don't repay, the site warns:
"Failure to repay will negatively impact your Lenddo score, as well as the score of your Lenddo friends. Lenddo MAINTAINS THE RIGHT TO NOTIFY YOUR FRIENDS, FAMILY AND COMMUNITY if the borrower fails to repay"
Of course, I hear you shout – How is this fair? What about if you just happen to have lots of friends who are bad with money, and have never missed a loan or bill payment yourself? Why should a person's work friend's credit score affect their ability to buy a house? Aren't typical credit scores enough?
Will other financial providers join the social media algorithm?
Banks use social media to befriend and spread the word on their products to customers, while employers use social media to determine the suitability of job applicants. How long before other financial providers are determining your suitability for their products and investments through your social profile?
Some start-ups are working on algorithms gathering data for banks from the web of associations on the internet known as "the social graph," in which people are "nodes" connected to each other by "edges."
"There is this concept of ‘birds of a feather flock together,'" said Ken Lin, CEO of the San Francisco-based credit scoring startup Credit Karma. "If you are a profitable customer for a bank, it suggests that a lot of your friends are going to be the same credit profile. So they'll look through the social network and see if they can identify your friends online and then maybe they send more marketing to them. That definitely exists today."
Apparently, banks and financial institutions have started exploring ways to use data from Facebook, Twitter and other networks to round out an individual borrower's risk profile.
"Credit score is a lagging indicator," said Brett King, a tall, puffy Australian with white blond hair who is the founder of the online-only bank Movenbank and author of BANK 2.0: How Customer Behavior and Technology Will Change the Future of Financial Services. "At best, your credit score is about 60 days behind. What we're trying to do is look for things that reflect the likelihood of a future default, rather than what's happened in the past."
Movenbank requires users to connect their Facebook accounts upon registering, data from which will be baked into a proprietary "CRED" score, a number that determines which rates and products are available. The exact recipe is still being written, but eventually Movenbank will boost your CRED as you hook it up to your accounts on Twitter, LinkedIn and even eBay, which calculates a reputation score based on buyer feedback.
In 2009 a woman in Quebec stopped receiving disability payments for major depression after Manulife decided, based on beach vacation photos on Facebook, that she seemed happy enough to work after all.
Facebook – will it sell our information?
Facebook lets advertisers reach exactly the kind of people they want by tapping into the information that users have revealed about themselves – and what next?
Suppose you run a hairdressers and you want to promote a special offer to women. Facebook can help you filter a target audience – choosing women rather than men, looking for women who have said they want a haircut even.
Next year the site is expected to make an initial public offering (IPO). While its services stretch further will your data start to be analysed and utilised by financial providers? After all, it is a giant repository of personal information.
Earlier this year, America's Federal Trade Commission ruled that Facebook had breached promises it had made to its users about privacy. It said the firm shared users' personal information with advertisers, despite telling them it would not do so, and continued to exploit users' personal information even after they had deactivated their accounts.
So perhaps the moral of the story is, beware of your social behaviour – think before you accept a friend, or tweet about your debt… You don't want to be caught out.< /p>
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