New reports indicate that your social media activity may impact your credit reputation and ability to obtain a loan. The Wall Street Journal shares that increasingly, companies are visiting social media sites including Facebook and Twitter when making lending decisions. Usually, they’re using social media to confirm a borrower’s identity, but they’re also searching the sites to determine creditworthiness. And the Fair Isaac Corporation (FICO) indicates that social media activity may soon be incorporated into their credit scoring.
While the practice of social media screening for financial decisions is not yet widespread, FICO’s interest in using social media data indicates that social media financial reputation could soon be a concern for all consumers and businesses seeking credit. This means that reputation management for individuals can have a bigger impact than ever before.
Should You Be Concerned With Your Credit Reputation?
In a nutshell, yes. You should be concerned with your financial reputation on social media. Social media has already had a financial impact for many users, with 92% of recruiters researching candidates online before making hiring decisions. It’s not a stretch to expect that what social media has done for recruiting decisions could be replicated in finance, especially with industry leaders including FICO considering making social media a part of credit scoring.
“There could come a time where certain social media could be predictive and we’re looking at that, but it isn’t yet,” says FICO senior consumer credit specialist Anthony Sprauve.
With FICO eyeing social media for financial predictions, that means everyone should be concerned with online financial reputation. But there are some lending groups that should be more concerned than others, as some companies are already making use of social media in credit decisions.
Consumers with bad credit or no bank accounts should be the most concerned with building a good financial reputation on social media. The Wall Street Journal reports that alternative scoring metrics, like social media, are most often used in order to make credit available to borrowers who might otherwise be denied.
Consumers using alternative lending solutions should also be aware of their financial reputation on social media. LendUp, a lending startup that brands itself as an alternative to payday loans, uses both private data and public social media information. In fact, during the application process, consumers can voluntarily elect to share Facebook, Twitter, and other social media sites for review. Though it’s not required, providing more data, including social media accounts, can improve their chances of approval.
LendUp scrutinizes borrowers’ relationships and community involvement when making credit decisions. “Do you have 4,000 friends but none are that close, or do you have 30 people but they’re very close?,” says LendUp CEO Sasha Orloff. “There are ways to measure how engaged and how strong your community ties are.”
Business lender Kabbage makes access to online accounts including Amazon, eBay, Xero or other e-commerce or accounting sites a requirement to assess creditworthiness. The company also considers Facebook, Twitter, and business social media accounts, looking for businesses with large online followings and responsive online customer service.
What Lenders are Looking For on Social Media
Financial screening on social media could be as simple as confirming that you are, in fact, John Doe from Chicago, Illinois. But some lenders are looking for more detailed information including your work history, layoffs, and reviews.
- Work history: Loan applications typically require your current employer’s information, with some even asking for a brief work history. Lenders are now checking out social media sites including Facebook and LinkedIn to see if what you’ve filled out on your loan application matches up with what you share online.
- Layoffs and terminations: If you’ve recently been laid off or fired, but didn’t make it clear on your loan application, social media might reveal the truth to lenders. Posting that you’re looking for a new job, or sharing your frustration with being laid off is a clear sign to lenders that you’re not currently employed.
- Negative reviews: Businesses seeking loans may be judged by online reviews, says the Wall Street Journal. Lending companies reported that a small business with negative reviews on eBay may have difficulty getting credit.
How You Can Manage Your Credit Reputation
Though the practice hasn’t taken hold in the mainstream just yet, it certainly doesn’t hurt to be prepared with a solid financial reputation on social media. And if you’re interested in alternative lending, building a good reputation online could be one more factor in your favor to secure a loan.
All of the usual online reputation advice applies here: avoid connecting with questionable friends, don’t use profanity, delete embarrassing photos, and squash your negative attitude, choosing instead to network with influential people, sharing thoughtful stories and positive information that makes you look good. But in addition to basic online reputation management, there are a few ways to really focus on building a good financial reputation online:
- Be careful who you’re friends with: Lenders including Lenndo are now looking at your Facebook friends to see if you’re connected with someone who is late paying back loans. Clean up your friends list, unfriending anyone who you’re not really close to or whose character isn’t really clear. Having deadbeat Facebook friends might just cost you your next loan.
- Match your work history: LinkedIn, Facebook, even job search sites like Indeed and Monster all share your virtual resume to some degree. Make this public information, and lenders can see where you currently work, how long you’ve worked there, and even past employers. Does it match what you’ve submitted on your application? It should. You may choose not to share this information online for privacy reasons, but lenders who can confirm what you’ve shared on your application online may be more confident in making credit decisions, especially if you have poor credit.
- Be discreet about your job: Though it may be helpful to list where you work, it’s usually not a good idea to talk about your job on social media unless your discussion is entirely positive. Share news about a promotion, finishing a project, or awards. Be careful not to say negative things about your boss, discuss a layoff, or actively seek out a job on social media unless you’re comfortable with lenders knowing this information.
- Establish positive reviews: Whether you’re a business or an individual, good reviews show that you’re responsible and can make good on your promises: factors that lenders value very highly. Businesses seeking loans now and in the future should actively solicit reviews to establish good online credit and a positive reputation. But this advice isn’t just for companies: individuals can benefit from good reviews as well. Your activity on eBay, Etsy, or other e-commerce sites can be reviewed and shared as a testament to your creditworthiness.
Protecting your credit is just yet another great reason to clean up your act on social media. It’s clear now more than ever that we’re living in a reputation economy. How does your online financial reputation look today?