New service uses social networks to assess creditworthiness

Though the practice is still a few years from becoming commonplace, a report by the New York Observer’s Betabeat blog states at least one credit scoring company is using potential borrowers’ social networking websites to determine their credit standing.

According to the blog, a micro-lending start-up company in Hong Kong, called Lenddo, makes the claim to be the first credit scoring firm to utilize social networking sites to assess the creditworthiness of prospective borrowers.

The source states Lenddo mostly uses information from Facebook, Twitter, Yahoo, Gmail and Windows Live to gauge credit scores for consumers looking for loans. However, the company’s specific algorithm that it uses to determine credit scores is secret.

Should one’s social networking information reveal friends or acquaintances with poor credit scores, Lenddo would view that potential debtor as a risk, the blog notes. Conversely, should a possible borrower be linked to people with high credit scores, their potential for a loan would increase.

“We think that in the age of the internet you should be able to establish your reputation and your identity through your social graph, through your on- and offline community, and use that to get access to financial products and information,” Lenddo CEO Jeff Stewart told Betabeat.

As of December, Lenddo is only operating in the Philippines, though the firm recently hired a former Google employee to begin the process of bringing the business to the Americas.

Matt Thomson, vice president of platform for Klout, a firm that calculates “influence” according to users’ social media patterns, told Betabeat banks have been querying about potentially using social media sites to determine credit risk since 2010.

However, media theorist Douglas Rushkoff expressed to the source that banks and lenders utilizing social media platforms to gauge credit could be considered a violation of privacy.

Currently, none of the three credit bureaus utilize social media information to analyze consumers’ credit scores. Instead, only information in credit reports, including credit history, length of credit lines open and income, are used to determine scores.

Consumers who are worried their credit scores may not be in the best shape might want to meet with credit counselors. These professionals can help them manage credit card debt and learn ways to improve their credit standing.