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Social media-based credit score?

By Janna Herron ·
Friday, January 13, 2012
Posted: 4 pm ET

Facebook friends could be the worst enemies of your credit score.

That's according to a disturbing article Friday from the New York Observer. The report, penned by Adrianne Jeffries, outlines the next frontier of determining creditworthiness: Using social media connections to help predict if you'll pay back your credit card.

(This is just as scary as Visa getting a patent to mine DNA databases to create better consumer profiles.)

Already, there's the Hong Kong-based Lenddo, a microloan startup that "is the world's first credit scoring service that uses your online social network to assess credit," according to its website. Right now, the company only operates in the Philippines, though it's setting up an office in the Americas.

Basically, the CEO explained in the article that if your Facebook friend took out a loan and paid it back, that means you probably will, too. And because your financial behavior affects how Lenndo rates your friends and family (and whoever else you socialize with online), they will get a notice if you fail to pay back your Lenndo loan.

Imagine how many people would defriend you then…

Even more alarming, the Lenndo CEO says he has been talking with major banks about his social media/credit calculation.

The big banks also have approached Klout, a company that measures "influence" using a person's social media activity. So this new way to gauge creditworthiness could go from fringe to mainstream very soon. (Actually, Jeffries pinpoints the time frame as in the next three to five years.)

I don't know about you, but I'm very interested in seeing the models that correlate your social media relationships with your creditworthiness.

I'm not exactly picky when I confirm a Facebook friend. We went to high school together, but I hated your guts? Sure, be my friend. You were in English Lit 101 in college? Yeah, I don't remember, but why not? We met at a co-worker's party three years ago? You're in.

Does this haphazard way of adding more virtual friends say something about my creditworthiness? I'm not so sure.

But if this is what the future holds, it means just one thing: Before you accept a Facebook friend, ask for a credit report.

Follow me on Twitter: @JannaHerron

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