Smart SpendingSmart Spending

Can social media ruin my credit?

How you behave on social media could cost you big time. Here's why.

By MSN Money Partner Mar 11, 2014 1:07PM

This post comes from Allison Martin at partner site Money Talks News.


Money Talks News on MSN MoneyThe days of airing out your personal life on Facebook, Twitter or any of the other social media outlets may be coming to an end if you want to preserve your good credit.


Man with laptop © Image Source/SuperStockWhy so? According to The Wall Street Journal, Facebook, Twitter and other social media outlets are being mined by some lenders to reach conclusions about your creditworthiness.


So, if you've considered going on a rant about your former employer because you were laid off, hold that thought. Or if you were evicted as a result of a foreclosure, social media may not be the place to express your disgust with the stubborn mortgage company.


By no means am I asserting that these actions will earn you an immediate rejection by potential lenders, but they may raise eyebrows and ding your wallet in the form of higher interest rates.


What about my traditional credit score?

According to myFICO, your FICO score is made up of five distinct factors:

  • Payment history, which accounts for 35 percent of your score.
  • Outstanding balances, which account for 30 percent.
  • Duration of credit history, which accounts for 15 percent.
  • New credit accounts, which account for 10 percent.
  • Types of credit used, which account for 10 percent.

However, FICO is considering getting on board with social media monitoring, which could present a major issue because its scoring model is used in more than 90 percent of lenders' decisions, the Journal says.


Is this a fair practice?

Considering the fact that some have nothing better to do than sit on social media outlets and create fake profiles, absolutely not. You certainly wouldn't want a creditor analyzing a profile that's not yours; it sort of reminds me of identity theft, but from a social perspective.


And even if the profile is indeed yours, is it really fair to have to censor every move you make in your private life? Kirsten Salyer writes on Bloomberg View that 71 percent of people using social media already self-edit what they post. Will they now have to evaluate what they write from a credit point of view?


Plus, she observes, nothing requires creditors to make sure that the information they read on social media is true.


Which lenders are adopting this model?

Before your nerves take over and you start deleting profiles, it's important to understand that not every lender is following this model. According to CNN Money, only a handful of startup lending companies are.


The Journal indicated that borrowers with bad or little to no credit history or without bank accounts are the ones primarily being placed under the microscope. The companies' reasoning: to give those who may have otherwise been denied a chance to qualify on the grounds of other factors.


What do you think? Should your social media postings be used to determine whether you're likely to repay a loan?


More on Money Talks News

1Comment
Mar 11, 2014 3:44PM
avatar
If you are dumb enough to trust social media you deserve what you get. People hide behind their devices and say things they are too much of a coward to say to your face. Surveys, reviews and commentaries are usually skewed and less than truthful. And people just fall for it hook, line and sinker. The weak minded are indeed easy to lead.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More