Credit rating agencies are using people’s social media accounts to determine their creditworthiness, according to a new report released by the British Financial Times.
It is common knowledge that employers check prospective employees out by trolling social networking sites. Colleges also employ people just to check out applicants Facebook and Twitter postings, but this is the first time credit checks have officially been linked to credit reporting.
The report says some of the top credit rating companies are using people’s social media accounts to measure ability to repay debt. It says TransUnion and FICO have been using a person’s social media activities for some time to assess credit profile, especially when people have not borrowed enough to give creditors an idea of what kind of risk they pose.
FICO’s chief executive Will Lansing says, “If you look at how many times a person says ‘wasted’ in their profile, it has some value in predicting whether they’re going to repay their debt. It’s not much, but it’s more than zero.”
Lansing says his company is working with credit card companies to formulate various way and policies for deciding what size loans credit card applicants can handle, with social media allowing them to collect information on people with limited credit history.
“FICO is increasingly looking at data on a spectrum to determine an individual’s credit-worthiness — with credit card repayment history being the most important factor on one end and information volunteered via social media on the other end.”
The report says that credit rating companies even use information such as movie rentals, along with phone payment history and address changes to make creditworthiness decisions. Address changes could suggest that they have problems paying rent and changing phone companies could reflect they can not make regular monthly payments.
FICO’s executive vice president Jim Wehmann says, “We can now score the previously un-scoreable,”
The take away messages from the report is to be careful what you post online, make sure your privacy settings are at a level which will make it hard for credit trollers to access information, and generally clean up your digital footprint.