If you haven’t learned from the social media horror stories floating around out there, here’s a quick reminder: lock it down. There’s a slew of reasons to rein in your behavior on the Internet if you’re putting your thoughts and feelings out there for everyone to see — no matter how articulate or ignorant they may be. And that does mean everyone, not just your ‘friends’.
Some of us are bound to learn the hard way that social media can be a land mine, particularly when it comes to your finances. According to a report from The Financial Times, creditors and big banks, eager to bolster profits, are looking for new ways to extend loans to consumers with little or no credit histories. Because there is little to draw from in assessing risk with these individuals, creditors are looking at non-traditional indicators of creditworthiness — notably, phone bills, utility bills, and what potential customers are posting on social media.
Specifically, some bankers might frown upon how many times you use the word “wasted” on your profile, and see that you may not be worth the trouble.
Of course, “wasted” is one of any number of words or indicators that could be flagged. And on top of that, Facebook has been securing patents and working with financial firms to help creditors assess creditworthiness based on an individual’s social networks, or the ‘friends’ they are talking to and interacting with on social media. If you, like a lot of people, engage in ‘low-brow’ discussions online from time to time, that may actually hurt you if you’re applying for credit.
Essentially, what these companies are doing is taking the data that people are giving them in order to make a judgment call. If they can’t determine through other means whether you are too risky for credit, these companies will basically probe the publicly available data from social media sites to help them make a decision. Presumably, if you’re dumb enough to take all of your drunken or illegal hi-jinks to the Internet, you’re probably not a wise investment in the eyes of creditors.
And again, this data they’re looking at is stuff that individuals are willingly and knowingly putting up on the Internet. It’s all out there, ripe for the taking.
This new tactic is a part of a new credit metric developed by FICO, which helps banks figure out who is and is not worthy of credit. According to The Wall Street Journal, which published a report about the new metric in early 2015, the idea is to find a way to help financial firms reach the 53 million people who forgo the use of credit, often because they have no scores, or low scores.
Banks want to expand their number of customers, and this metric gives them a way to do it. Also, for those folks who have low or no credit scores, creditors can typically charge more, or give them higher interest rates until they’re proven trustworthy. As we’ve discussed, the way to make the call as to who is worthy and who is not is by digging through non-traditional sources of information.
So, if you haven’t been paying attention to what kind of information (or emotional tirades) you’ve put on the Internet for public consumption, be aware that this sort of information is now being scrutinized by more than just your mother — bankers and credit officers are taking a gander as well.
But really, should this be all that surprising? We’ve known for some time now that employers are engaging in similar tactics, in an effort to collect more information about employees and job applicants. Not only that, but there’s also been evidence of tracking electronic devices, and digging through consumer histories to get more information. Credit checks have become a lot more common these days for job applicants, and it’s a big problem that’s actually causing people to miss out on opportunities that may have otherwise helped them improve their situations.
Don’t fall into the trap. Start taking some serious precautions when using social media, and make sure you’re keeping an eye on your credit score and staying up to date on your bills. Information is a weapon, particularly these days. And with the ubiquity of data and new techniques available to analyze it, revealing more about yourself than necessary could come back to bite you.
Follow Sam on Twitter @SliceOfGinger