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How Social Media Posts Impact Creditworthiness

Last night’s debauchery, documented for the world to see, may be tomorrow’s tarnished credit score.

As reported by Investors.com, credit rating giants, such as FICO and TransUnion, are adding new layers of information to calculate creditworthiness, gathering evidence from social media sites, such as Facebook, and even data compiled from smartphone usage. That comes in tandem with credit card and car loan payment histories.

And, Investors.com reported, FICO (or by its formal name, Fair Isaac) is working with some of the largest credit card issuers in the United States to compile alternative forms of data in order to pinpoint just who is creditworthy and who is not. Through using alternative sources of information to triangulate creditworthiness, FICO has said it can “reliably identify millions more consumers who qualify for credit,” according to Investors.com. That extends to mobile phone usage, an activity that is seen across the vast majority — as much as 90 percent — of U.S. adults.

As younger borrowers and would-be borrowers are generally more tech-savvy than other demographics, social media, ranging from Facebook to Instagram, may give credit agencies an inkling about individuals’ attitudes toward debt, and other possible avenues may include shopping data gleaned from eCommerce giants, such as Amazon and eBay.

Taken as a pool of data, all of these sources may shed light on the attractiveness of some 18 million Americans as lending prospects, even though they may have had negative credit histories, and another 25 million that have no credit history at all. And it should be noted that in other countries such as China, such alternative data is finding currency with lenders.

As has been widely reported, earlier this month, TransUnion said it had made available its new expanded credit rating offering, known as CreditVision Link, which melds what might be termed “traditional” credit data and alternative sources. That, in turn, has led TransUnion to identify up to 24 percent greater numbers of approvals for auto lenders. Data sources for CreditVision include as many as 3 billion nontraditional records tied to as many as 260 million Americans.

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