Written by Teddy Rhys
Posted on 26/09/2013

Quality not quantity: the dangers of crowdsourcing credit information

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The telegraph is reporting that the way we use social media could affect our credit ratings for loan and mortgage applications.

Since the early days of social media platforms, some employers have been running due diligence on potential recruits and looking at the profile pictures of current staff. Now it seems that we have to contend with lenders scanning the internet to assess their credit worthiness! Approval and pricing of credit could be linked to the user’s online “presence”, meaning the quantity and “quality” of a person’s followers on Facebook or Twitter. So if a person is connected online with somebody who is known to be in arrears, this could impact their credit check rating.

Right now, most lenders use credit risk methodologies based on data kept on file by traditional agencies such as Graydon. This is a tried and tested approach that actually works. The idea that credit worthy (or unworthy) people socialise together is intuitive, but this is really a way of crowdsourcing credit information without people’s knowledge, and raises serious concerns about service providers’ access to our data.

People deserve to be judged on their own credit history, rather than stigmatised by their association with others. We choose our friends because they make us smile, not because of their financial status. The development of social media has entered a new phase – as the leading players in this space go public via high-profile and lucrative IPOs, they will need to further monetise their user bases in order to generate shareholder returns. That means compromising user experiences by increased commercial partnerships that rely on access to users’ data. As this happens, niche social media platforms that protect users and their data will grow in popularity.