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Last updateTue, 17 Mar 2015 2pm

Business

Facebook "Friends" could affect your Credit Rating

Lenders checking the credit-worthiness of loan applicants - popular with overseas finance firms - may soon be regular practice in the UK.

A number of credit-rating agencies in the US and elsewhere now check the Facebook activity of applicants for loans, mortgages and other types of credit, to check if any of the applicants' friends are in debt.

The assumption is that people with good credit will tend to friends and socialise together.

One firm using this approach is Lenddo, which calls itself a "trust-based lender" and so far lends in emerging markets like the Philippines and Mexico.

It was explicitly established to "leverage the data in social networks" and believes borrowers' online reputations - measured through their activity on Facebook and so on - will be a valuable way of assessing their creditworthiness.

The chief executive of Lenddo Jeff Stewart said in an interview with news channel CNN that: "Humans are really good at knowing who is trustworthy and reliable in their community." He explained that increases in computing power meant it was now possible to scour much more data as part of making the lending decision. This could include, for instance, looking to see whether an applicants' friends included other borrowers with the business - and then checking to see how they were faring with repayments.

Lenddo is among the more outspoken of firms using social media as part of its checks. But it is not the only one.

Movenbank is a US financial firm hoping to launch in the UK by the year-end.

It prices its deals based on the borrower's influence as measured, among other factors, by how many followers or friends he or she has on Facebook, LinkedIn or Twitter, among other sites.

The trend is part of far-reaching changes in the way customers bank and borrow.

Most lenders still make use of traditional information kept on file by agencies such as Experian and Equifax, but they are increasingly likely to incorporate other information into their decisions as well.

Some for instance will use payment information from eBay, Paypal and Amazon alongside more traditional sources.
Controversial short-term lender Wonga tracks how potential credit applicants use the website before they apply. It might treat applicants who immediately seek the biggest possible loan differently from those who spend time on the site researching various loan sizes and reading other categories of information.

- Staff Reporter

Lenders checking the credit-worthiness of loan applicants - popular with overseas finance firms - may soon be regular practice in the UK.

A number of credit-rating agencies in the US and elsewhere now check the Facebook activity of applicants for loans, mortgages and other types of credit, to check if any of the applicants' friends are in debt.

The assumption is that people with good credit will tend to be friends and socialise together.

One firm using this approach is Lenddo, which calls itself a "trust-based lender" and so far lends in emerging markets like the Philippines and Mexico.

It was explicitly established to "leverage the data in social networks" and believes borrowers' online reputations - measured through their activity on Facebook and so on - will be a valuable way of assessing their creditworthiness.

The chief executive of Lenddo Jeff Stewart said in an interview with news channel CNN that: "Humans are really good at knowing who is trustworthy and reliable in their community." He explained that increases in computing power meant it was now possible to scour much more data as part of making the lending decision. This could include, for instance, looking to see whether an applicants' friends included other borrowers with the business - and then checking to see how they were faring with repayments.

Lenddo is among the more outspoken of firms using social media as part of its checks. But it is not the only one.

Movenbank is a US financial firm hoping to launch in the UK by the year-end.

It prices its deals based on the borrower's influence as measured, among other factors, by how many followers or friends he or she has on Facebook, LinkedIn or Twitter, among other sites.

The trend is part of far-reaching changes in the way customers bank and borrow.

Most lenders still make use of traditional information kept on file by agencies such as Experian and Equifax, but they are increasingly likely to incorporate other information into their decisions as well.

Some for instance will use payment information from eBay, Paypal and Amazon alongside more traditional sources.

Controversial short-term lender Wonga tracks how potential credit applicants use the website before they apply. It might treat applicants who immediately seek the biggest possible loan differently from those who spend time on the site researching various loan sizes and reading other categories of information.

- Staff Reporter

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