How you behave on social media could cost you big time. Here's why.
The days of airing out your personal life on Facebook, Twitter or any of the other social media outlets may be coming to an end if you want to preserve your good credit.
Why so? According to The Wall Street Journal, Facebook, Twitter and other social media outlets are being mined by some lenders to reach conclusions about your creditworthiness.
So, if you’ve considered going on a rant about your former employer because you were laid off, hold that thought. Or if you were evicted as a result of a foreclosure, social media may not be the place to express your disgust with the stubborn mortgage company.
By no means am I asserting that these actions will earn you an immediate rejection by potential lenders, but they may raise eyebrows and ding your wallet in the form of higher interest rates.
What about my traditional credit score?
According to myFICO, your FICO score is made up of five distinct factors:
- Payment history, which accounts for 35 percent of your score.
- Outstanding balances, which account for 30 percent.
- Duration of credit history, which accounts for 15 percent.
- New credit accounts, which account for 10 percent.
- Types of credit used, which account for 10 percent.
However, FICO is considering getting on board with social media monitoring, which could present a major issue because its scoring model is used in more than 90 percent of lenders’ decisions, the Journal says.
Is this a fair practice?
Considering the fact that some have nothing better to do than sit on social media outlets and create fake profiles, absolutely not. You certainly wouldn’t want a creditor analyzing a profile that’s not yours; it sort of reminds me of identity theft, but from a social perspective.
And even if the profile is indeed yours, is it really fair to have to censor every move you make in your private life? Kirsten Salyer writes on Bloomberg View that 71 percent of people using social media already self-edit what they post. Will they now have to evaluate what they write from a credit point of view?
Plus, she observes, nothing requires creditors to make sure that the information they read on social media is true.
Which lenders are adopting this model?
Before your nerves take over and you start deleting profiles, it’s important to understand that not every lender is following this model. According to CNN Money, only a handful of startup lending companies are.
The Journal indicated that borrowers with bad or little to no credit history or without bank accounts are the ones primarily being placed under the microscope. The companies’ reasoning: to give those who may have otherwise been denied a chance to qualify on the grounds of other factors.
What do you think? Should your social media postings be used to determine whether you’re likely to repay a loan? Share your view in the comments below or on our Facebook page.