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Should social media deem you creditworthy?

Kelly Dilworth

Some dismiss it as hype. But the buzz around using social media data with, or in place of, traditional credit scores is still around and has won over some influential evangelists.

Bill Clerico, CEO of the small business payment processing service WePay, for example, recently became the latest social media advocate to extoll the virtues of using social media profiles to help decide whether a person or a business can be trusted.
In a guest column on VentureBeat, Clerico wrote about his company’s experience with using social media data to help make underwriting decisions for small businesses and check for fraud.Should your social media data help secure you a loan?
In the article, Clerico writes, “A traditional credit score only shows a sliver of a person’s or business’s risk potential, but an online profile shows a more accurate personal history of verified social data.”
According to Clerico, his company scans a business’s social media presence in order to verify that the business is legitimate and decide whether or not to sign them up with WePay’s payment processing service.
So far, it’s been successful, he says.
The consumer reporting companies Equifax and Experian are also testing the use of social media profiles to verify loan applicants’ information, according to a Bloomberg News article posted May 30. (In addition, a number of smaller payment startups, such as LendUp and Affirm, are using social media data for similar purposes, including checking for creditworthiness.)
According to Bloomberg News, companies aren’t just looking at the publicly available information that’s on users’ Facebook, LinkedIn and Pinterest accounts. Some are also scanning the Web for digital trails left on forums and review sites, such as Yelp.
But despite its burgeoning popularity with Silicon Valley and some credit bureaus, not everyone’s convinced that scanning social media is the key to unlocking a person or business identity.
Social data is easy to manipulate
To explain why he feels so comfortable trusting social media data, WePay CEO Bill Clerico emphasizes that faking a robust social media presence is difficult.
“Sure, you can create a profile quickly, but with Twitter and Facebook Timeline alone, it could take fraudsters years to build a fake, yet realistic, social presence,” writes Clerico.
That may be true if you’re looking to scam a company today. Social media has only been around for a little over half a decade, after all, and I would expect that many fraudsters are just starting to realize the value of using the networks to manufacture believable fake identities.
But a sophisticated scammer who’s targeting large sums of money is unlikely to be deterred by the time it takes to set up shop.
Meanwhile, companies that are actively promoting the use of social media data for various credit purposes have yet to come up with a satisfying rebuttal to the argument that faking an online identity is ridiculously easy.
(Curious about how long it would take to create my own fake profile, I merged the names of my two favorite recording artists — Iris DeMent and Gillian Welch — and used it to set up a faux Facebook account. The process took me about three minutes tops.)
According to a 2012 estimate, around 83 million Facebook accounts are fakes. Facebook doesn’t bother to verify the identities of its users before handing out accounts. Neither does Twitter, LinkedIn or Pinterest. And as Bloomberg News points out, if you need friends and followers to quickly boost your status, you can pay for that as well.
You can also just randomly “friend” real people and hope they accept. Or, if you’re really determined, you can create genuine relationships on the Web and scam other users into thinking you are who you say you are. (The former Notre Dame linebacker Manti Te’o certainly isn’t the first person to be duped into believing that someone he or she met online actually exists.)
After all, as many experts have pointed out, most people’s online social connections are tenuous, at best — which makes it even easier for fraudsters to worm their way into real social networks. (Among the hundreds of Facebook friends that I’ve accumulated since joining the site in 2004, for example, I actually only see about a quarter of them in person. Most are people I went to elementary, high school or college with and some are people I’ve never met.)
That’s also why I don’t buy the argument that the company you keep online should somehow help determine how risky you are to lenders. There are just too many different and often shallow reasons why people become friends through networks such as Twitter, LinkedIn or Facebook.
I have also yet to hear a credible reason for why mining someone’s Facebook likes, speech patterns or online community of friends is an effective — and fair — barometer for determining who they are, or whether they’ll lapse on a loan.
Until companies figure that out — and provide a good rationale for using that kind of data — I doubt the use of social media for lending decisions will enter into the mainstream anytime soon.

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