When the news came on Investors.com that credit reference agencies will soon scout your social media activity, it was met with scepticism. Especially in the past 6 years, many reports have emerged on how lenders to potential employers may have ‘credit checks’ on social media to determine the eligibility of a borrower.
While still a long way from becoming a common practice in the UK, credit checks using social media are already being conducted by lenders. The big question here – is a lender rightful in monitoring an individual’s online activity and social media presence in order to decide the approval or credit card, loan or mortgage?
Considering the Existing Cases
Lenders outside the UK have already started using Facebook to check the eligibility of applicants in number of ways. One way of doing this is checking the friends’ list of a potential borrower to see whether or not they have friends who have taken out credit from the same lender. The lender then checks their repayment history to find out if their friend (the potential borrower) has the ability to keep up with repayments or has friends who can be guarantors on their loans.
Consumers in emerging markets such as Mexico, Philippines, and South American countries are being increasingly targeted with social media credit checks. The case lending companies are making in such markets, which will likely be the reason for wide scale implementation when credit checks by social media do come to the UK, is that potential borrowers who are friends with people having good credit records may have a good credit report themselves. So basically, socialising with people who maintain good credit may come in handy for you in the near future.
Implementation in UK
It’s no surprise that online shopping activity and online presence of consumers is being targeted for marketing and other initiatives. Adding social media credit checks to this cycle (think big data) could allow lenders to paint a much more detailed picture of potential borrowers.
Of course, lenders today are increasingly deploying measures to get more and more information about potential borrowers. In addition to the credit reports they can get from Equifax, Experian, and other credit reference agencies (upon permission), lenders today are looking into other online mediums from which they can derive information that affects your eligibility to take out credit.
Future of Credit Checks
It is a fact that more information about a person is available to lenders today than ever. However, in the case of social media, a systematic and automated approach to social media credit checks can help in determining the feasibility of a potential borrower. At the same time though, this also raises concerns regarding privacy and what could be identified as personal information in the future.
The takeaway here is that we wouldn’t bet against credit checks on social media, especially as they are about to make their way to the UK. However, we must emphasise that a robust framework and some regulations in data collection are necessary to bring it to full swing.…Read More