On August 25th, 2016, The Financial Times revelation that social media data could be used to calculate credit rating sent shockwaves that persist to date. Credit reference companies, according to Aime Williams, have indicated that the data they collect from social media such as Facebook could be used alongside other factors to determine an individual’s credit rating. However, millennials start using social media way back before going to school and are shocked to establish that their behavior could easily block access to credit and other related services.
How exactly will social media data be applied to help calculate the credit rating?
To agree with Aime Williams, an individual’s behavior can perfectly indicate how credit worthy he/she is. However, it is never easy to pull out such info especially on a free platform such as Facebook and other platforms. If it is this hard, how do credit reference agencies plan to do it?
- Evaluating how account owners use specific terms: Though the process of picking and testing the terms that can correlate with creditworthiness is still ongoing, the US and China are already testing the use of words such as The number of times that one uses the term wasted is believed to have value and act as a pointer to an individual’s fiscal behavior.
- Personal friends on social media: In China, the people on your friends’ list are believed to influence personal credit scoring. This strategy is expected to start working by 2020 and target assessing an individual’s trustworthiness. If you are friends with trusted people, you are also considered more trustworthy.
Is this really realistic and achievable?
The focus on social media has been considered a highly complex and perhaps unrealistic. This is a great concept, but a little too stretched. The moment that people realize that their social media data is under focus, they can easily change behavior in the following ways and make collecting related data difficult.
- Using alternative terms that do not denote wastefulness: Because the main focus is pulling data and looking for terms such as wasted that point to bad fiscal behavior, people can easily change to alternative terms to express the same details.
- Avoiding discussion related to finances on social media: The moment that people understand that discussions around finances can affect their credit rating: The first line of defense is shying away from such discussions. This will alter the data collected by credit reference agencies.
- Only including the terms and language that point an individual is credit worthy: If getting the right terms on your Facebook conversation is what will raise the credit rating, it will be very easy to influence by simply using such words.
Risks that come with adopting social media data to calculate credit rating
Social media has proven to be a wilderness and using it for applications such as credit rating can be really tricky. In some cases, the terms that many people utilize are not even innate; rather, they get such posts and share them with friends so that they can also read. Therefore, it will be unfair to simply pull down credit rating of an individual simply because of some terms in their profiles or their friends.
To agree with Aime Williams, this is a very ambitious plan. Before implementation, it requires many years of research and testing to ensure that people’s behavior can be captured systematically and evaluated on a realistic gauge.