Traditionally, your credit score is determined by things like steady employment, paying bills on time, outstanding loans and number of inquiries into your credit history. But one lending firm is adding Facebook friends to the list.
How can your Facebook friends affect you're ability to get a loan? Lenddo, a microlending firm based in Hong Kong, believes that the likelihood of your friends to pay back loans or not could be indicative of your habits as well.
The New York Observer's Beta Beat has more on what the company says is "the world's first credit scoring service that uses your online social network to assess credit":
The company’s algorithm is proprietary and secret, said CEO Jeff Stewart, but the primary metric is what Lenddo knows about the people you’re friends with. “We think that in the age of the internet you should be able to establish your reputation and your identity through your social graph, through your on- and offline community, and use that to get access to financial products and information,” he said.
If Lenddo sees one of your best Facebook buddies took out a loan and paid it back, there’s a good chance you will too. “Our backgrounds are in machine learning and pattern recognition,” Mr. Stewart said. “It’s some serious math.
Beta Beat tested out getting a loan and was asked for its Facebook account, as well as Gmail, Twitter, Yahoo and Windows Live. It was then given a credit score. To apply for an actual loan, it would need to have at least three friends with connections to Lenddo and a decent credit history themselves.
What's more, Beta Beat reports that if you default on your loan, the company reserves the right to broadcast this information to your friends. After all, they could be affected by your credit score as well:
“I think Mark Zuckerberg said it best,” Mr. Stewart said. “Every industry will be in fact impacted by social.”
Banks have been curious about using social media to gauge risk for at least a year, said Matt Thomson, VP of platform at Klout, which calculates “influence” based on a user’s social media activity. Determining creditworthiness is not a core product of Klout’s, he said, but banks have approached the startup to ask about it. He wouldn’t name names. “It’s really like the who’s who of banking,” he said.
While some may consider this an extreme invasion of privacy, others like media theorist Douglas Rushkoff, Beta Beat reports, don't consider such a thing as private anymore:
“We’re already in the nightmare scenario,” he wrote in an email. “They already know everything about you—more than most of us realize. If anything, the addition of social networking information to this data mining will help us come to some understanding of how much more these companies know about us than we know about ourselves.”
As of right now, loans are only offered in the Philippines, but Beta Beat reports that the company recently hired an ex-Google employee to begin on in America.
[H/T IT World via PC World]