Can You Get A Loan Approval With Your Facebook Profile?

Some years back, a phone call shook up Google’s CIO Douglas Merrill. His sister-in-law Vicky wanted to buy snow tires for her car. She didn’t have the cash nor a high enough credit rating to take a loan.

It helped Merrill understand how terrible the credit scoring industry can be to people in desperate need of money. Thus he started Zestfinance, an alternate credit scoring company that relies on machines and math to come up with a more wholesome reading of a loan applicant’s creditworthiness.

Traditional credit rating techniques in the US involve reading through such data as a loan applicant’s ability to settle his phone bills on time. There could be 50 such traditional data points, according to Zestfinance who instead base their credit scores on thousands of data points.

Merrill says he doesn’t want to snoop into people’s social media profiles yet because, in his words, it is “creepy”. But social activity is slowly becoming one of the tools through which lenders assess loan applicants.

Alternate credit scoring is becoming a global phenomenon now, even as Zestfinance is getting into the massive Chinese market in partnership with the e-commerce company JD.com. This, while the Chinese government is reportedly planning to launch its own social credit rating system by 2020.

The project, called the Social Credit System, has been variously described by the press as “Orwellian”, “dystopian”, and “frightening”—a single, digitised entity that could track and record every Chinese citizen’s activities from data points as varied as online shopping to their spending habits to traffic ticketing.

Many of these social credit systems are ambiguous about using social media activity as a data point. In India however, some agencies are already assessing you by your social profiles.

Crif High Mark Credit Information Services Pvt. Ltd, one of India’s four credit bureaus, said they will assess financial behaviour of loan applicants on Facebook, Twitter or Linkedin if there’s no credit history to judge them by.

What are the positives from such a system?

There should certainly be an alternate credit scoring. Why? Zestfinance has been beneficial to loan seekers hard done by traditional credit agencies. Alternative data points help lenders get a more fulsome read on their loan applicants, especially those applicants with troubled credit histories—or no credit history at all. For borrowers with no credit history, their social activity could act as a testament of their character.

We’re still a long way from moving completely away from traditional credit bureaus such as CIBIL. But meanwhile, watch how you behave online. Someone may be judging your creditworthiness by it.