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When Banks Use Facebook Friends To Determine Your Credit Score

• bproper 15y ago
  So in a scenario where social credit becomes a part of your economic health as an individual, what happens to friends and family that declare bankruptcy? They become some sort of pariah, avoided on Facebook and Twitter?
  • kstenerud 15y ago
    Or helping someone becomes a dangerous proposition, because they'll likely add you to their social graph, dragging you down. It'll be just like those social clubs that determine what you're allowed to do in your private life and who you're allowed to hang around if you wish to remain a member. Stratification would occur automatically out of fear, as each clings desperately to their social position and tries to keep their social graph pure now that it has real-world consequences.
    • sukuriant 15y ago
      This right here is my single greatest fear of banks knowing/using this information. If I befriend an undesirable (because I see past society's assumptions/the rough times this person has had in their life/whatever), or I care for an undesirable, I am punished. Of course, I would have to weigh if it's worth it (it probably is), but the fact that things like this may have to be considered is just depressing and wrong. Heaven help the preacher that friends his congregation. Not everyone comes from a rosey past.
• jedberg 15y ago
  Back in the days of Old Man Potter, the bank solved this problem by being local and the banker actually was your friend, so he already knew your social graph.
  • beagle3 15y ago
    Yes, he knew your social graph. But as for being your friend, ... well, ....
    • rdtsc 15y ago
      I guess if he wasn't your friend he also wasn't your banker for long.
      • beagle3 15y ago
        why would you guess that? Banking is a business, and always has been.
        • rdtsc 15y ago
          The point was that in a small town the banker knows who you are and can evaluate your risk just by being acquainted with you. If he trusts you, he might just be your friend, if he doesn't then he is probably not your banker. (Yes the word "friend" is a bit hyperbolic in this case)
  • patio11 15y ago
    Yes, but that banker used heuristics like "Tom is a good white Christian who goes to church every Sunday, of course he is good for the money" and this algorithm can be proven not to, even if it comes to very similar credit decisions as Bill the Biased Banker. This is part of the reason why credit scores took over the world in the first place: they're demonstrably blind to protected classifications. (They're also more accurate than Bill the Biased Banker and orders of magnitude cheaper to run and execute virtually instantly at 3 AM in the morning, but if their only feature was "As effective as traditional underwriting but immune to anti-redlining legislation" they'd still have taken over the world.)
    • lurker14 15y ago
      https://en.wikipedia.org/wiki/Disparate_Impact https://en.wikipedia.org/wiki/Disparate_Impact
• benatkin 15y ago
  I think half of my facebook friends are people whom I don't know in real life. On twitter it's probably 80%. Many of my replies and retweets are for people whom I've never met. So they won't find out a lot unless they get clever, which could be time consuming.
• danielharan 15y ago
  I'd like to see actual evidence that a few bad friends are a good indication of your own credit rating. Frequency of posts, number of new friends/contacts in the last month, grammar/spelling -- all might be better correlations to your paying debts.
• callahad 15y ago
  My first reaction: "Why would I volunteer that information?" Followed quickly by: "I don't have to; my less-savvy friends would. And I'm in their graph." At which point, it's in my interest to disclose my own social graph, so that the bank sees that I'm actually connected to responsible people, too. Which means betraying those individuals' presence in my graph. Gah!
  • oneplusone 15y ago
    or just get rid of Facebook.
    • jisaacstone 15y ago
      But they still keep all my data, yeah?
      • inerte 15y ago
        All of your data plus a byte saying it was deleted.
    • ajross 15y ago
      And cut yourself off from the people you interact with there. Social networks have very high value. You can't expect people to throw them out -- they love them. This is why people talk seriously about regulating privacy handling, to prevent this sort of abuse.
      • Splines 15y ago
        Social networks have very high value. They only have value that is voluntarily put into them. There are certainly young-ish people that for them, Facebook is their social world. On the flip side, there are certainly people who rarely visit it, and deleting their account is no more problematic than abandoning a random forum account. Personally, I'm falling into the second bucket as I get older. I like seeing updates for the people around me, but if I deleted my account I wouldn't miss it.
      • 15y ago
• rickdale 15y ago
  People that use facebook don't care. They would rather use facebook than have privacy, thats the bottom line. To them the benefits on facebook outway the problems. For most people if you told them they would die in 10 years if they continued to use facebook, they would still use facebook. For a lot of websites today and apps, you can't even login or do anything without a facebook profile. Find me one person that is outraged and dropping their facebook account in light of this information. On top of all that banks aren't lending money nowadays anyways.
  • kayoone 15y ago
    Valid point, but still accepting to disclose some private info is still somewhat different to accepting to die in 10 years time for using a service. If that were the case, FB would be gone in no time and G+ would finally rise ;)
  • untog 15y ago
    People that use facebook don't care. That's pretty obviously not true because "what they care about" can change a lot. "Facebook is using face recognition!" = OK, no huge deal. "Banks are using your info for credit scores!" = a big deal. If someone has those responses they aren't being inconsistent. "Privacy" has a variable definition, so "Facebook users don't care about privacy" makes no sense.
  • deleted 15y ago
    [deleted]
• lysol 15y ago
  The article is alarmist for sure. I highly doubt these startups centered around this activity will outlast the inevitable death of the platforms they're attached to.
  • deleted 15y ago
    [deleted]
• RexRollman 15y ago
  "The first thing Lenddo asks for is a Facebook account; then it wants access to Gmail, Twitter, Yahoo, and Windows Live." Umm, pardon my French, but fuck that.
  • herge 15y ago
    How much is access to your Facebook account, Gmail, Twitter, etc, worth? What happens if the bank offers to lower your rate if you give access? What happens if you cannot find a bank that gives you a loan without insisting that you give them access to your accounts?
    • nupark2 15y ago
      > What happens if you cannot find a bank that gives you a loan without insisting that you give them access to your accounts? This is what I find so frightening about the Facebook-login-only web services. It's the first step towards the widespread requirement of a massively asynchronous information+value exchange between customers and businesses.
      • premchai21 15y ago
        If you actually mean “asynchronous”, could you please explain how that is relevant? Or perhaps you meant “asymmetrical”.
        • nupark2 15y ago
          Thanks for the correction; I meant asymmetrical.
    • xer0 15y ago
      "What happens if you cannot find a bank that gives you a loan without insisting that you give them access to your accounts?" Then you either go to another bank, or maybe you don't get the loan from any bank. If you don't get the loan, you change your plans to save up cash, or you change your goals. Either most people will go along with this (likely), or banks will have to decide if a smaller loan pie is good business.
• rkon 15y ago
  Who wants to buy an invite to my high-roller social network? We promise to weed out those "untouchables" who are losing their jobs and homes! Honestly, it would only be a matter of time before we saw entirely fabricated social groups. Unless social networks start requiring photo ID/SSN to join. Not to mention the potential this would have to further skew wealth distribution in favor of the rich while strengthening the barriers that already prevent upward economic mobility.
  • snorkel 15y ago
    Reminds me of long-forgotten blog post I read where someone claimed they were able to raise their credit score by subscribing to affluent lifestyle magazines, luxury catalogs, charging small purchases from Neiman Marcus and Sacs Fifth ... just creating a trail of data that would give the appearance of being in a higher income bracket produced a lot of interesting side effects.
    • fleitz 15y ago
      The thing most people don't realize is that your credit score is mostly an indication of how much the bank can make off of you, and your income. High income basically always gets you a high credit score, and making minimum payments also gets you a high credit score. Lets say two people who both have the same income, the person who pays their debts off fastest will have the lower credit score. It's pretty easy to get a high credit score by maintaining a balance on a high interest credit card.
  • mbesto 15y ago
    Every system that is created will have a greater or more complicated system simply created in order to game it.
• benjvi 15y ago
  Articles critical of the loss of privacy that comes along with social media often come up with this type of scaremongering. 'If you know someone that has bad credit, then you won't be able to get credit either'. Well, if your relationships do actually effect your ability to repay your debts, then banks would be right to be at least a little more wary of giving you credit - amd you should not be trying to overextend your credit. I would have said that the undesirable practices that are mentioned - such as redlining - are the result of using crude, discriminatory heuristics rather than the result of having too much data about customers. This isn't necessarily a bad development - it could enable banks to lend to more marginal borrowers if they could see they had a strong support network. Clearly, if you have a good conventional credit record, then your social credit will hardly matter. Banks that use this new source of data stupidly won't do well.
• DannoHung 15y ago
  If you want a picture of the future, imagine a boot stamping on a human face — forever
• JofArnold 15y ago
  I'm probably going to go to downvote hell for this, but I need to say it; I'm massively disappointed startups are still using their energy and talents to service the loan industry. It's 2011 - have we learnt nothing from the past 3 years? Build value, don't destroy it.
  • dantheman 15y ago
    Selecting qualified people for loans is a valid industry that promotes growth. The goal is to loan the right amount and that the person will pay it back. If you can do that accurately and loan to people who would fail normal tests then you've created significant value.
    • JofArnold 15y ago
      What if the person in receipt of the loan was selected with perfect accuracy but then his/her circumstances changed due to no fault of their own? No loan is a "good" loan. Loans facilitate the reallocation of money. No net value is created and for the majority "value" decreases in fact. I'd challenge the "leads to growth" assumption too but I'm on iPhone and I don't wish to hijack the thread. Essentially, it does not lead to sustainable growth for the majority (or the economy for that matter)
      • dantheman 15y ago
        There are lots of loans that shouldn't be issued due to no fault on the person being invested in. For instance, I've been working on opening an icecream shop for weeks and need a loan to finish the preparations and a bigger better icecream shop opens next door. Through no fault of my own, I am no longer a good investment.
        • finnw 15y ago
          It is your fault if the bigger better icecream shop opens next door and you still persevere with your original plan. That suggests that you personally are a bad investment (not just your original business plan.) I would be more likely to give you the money if you needed five times as much, because you had decided to sell pies or pizzas instead.
• mooki 15y ago
  This goes both ways. If it becomes commonplace, there will be a business in SEO'ing your social media profile. I wouldn't be surprised if a large portion of facebook will consist of networks with good credit scores all friending eachother and blogging about savings tips.
• nostromo 15y ago
  The social graph is much easier to fake than paying your bills on time: Unfriend, apply for mortgage, refriend. However this does sound an awful lot like collective punishment -- and may even open the banks up to discrimination lawsuits.
  • jellicle 15y ago
    But now the data available to the credit bureau consists of you being friends with others, then unfriending them just prior to applying for credit. Which sounds like an intent to deceive, which is worth -200 points on your credit score. You didn't think unfriending people erased your historical association with them, did you? "Deleting" data is so 1995. Facebook has never deleted anything, and they're not going to start. Google may be partially anonymizing some old data, but my guess is it isn't really anonymous - probably Google can reconstruct everything you have ever searched for, ever.
• rajat 15y ago
  The implicit assumption here is that judging your credit score using your social graph will give the wrong answer: as in either claim you are a deadbeat when you're not, or claim you are trustworthy when you're not. But, judging from other stories here and elsewhere, your social graph does seem to yield mostly accurate information about you. So, most likely, you are likely to be tagged as a deadbeat or not correctly. More meaningful, I suppose, is for those of us that are very careful about social media. I have a Facebook account, but use it very little. However, it has come in very useful in that long lost friends have been able to get in touch with me through it. I must admit, I have never really initiated that myself (ie. go search for someone). So, am I likely to be judged incorrectly solely on the basis of being a social media avoider; that is, are the banks going to say hey ignore social media stuff for this guy, or are they going to say, loners avoid social media and loners are likely to be bad credit risks? I am definitely a member of the group that almost instinctively react negatively to the use of social media for data mining like this. I am also aware that I'm old enough that I might just be an old fuddy-duddy. I wonder how many articles were written about the loss of privacy when telephones started becoming popular and when the white pages were introduced.
  • im3w1l 15y ago
    People will also be incentivized to "prune" their social graphs of undesirables.
• patio11 15y ago
  Some days I hate being right. http://news.ycombinator.com/item?id=954276 http://news.ycombinator.com/item?id=954276 [Edit: The article says the ultimate nightmare is the banks using this to access data that they can't ask you for on forms. That is unlikely. What they'll do instead is do exactly what credit scoring does: develop an algorithm which a) improves assessment of risk and b) is totally, verifiably blind to all protected classes which c) happens, as a side effect, to correlate very strongly with membership in certain protected classes.]
  • dman 15y ago
    Its days like these that explain why so many of us pay close attention to what you have to say. :)
  • koenigdavidmj 15y ago
    I bet the people at working at The Onion do too.
  • gacba 15y ago
    The problem with trolling my FB account for understanding my behavior is that people fall into roughly 3 categories: - Old work associates - School friends - Family and close friends If I have a deadbeat cousin who also happens to be the black sheep of the family, they may penalize me unfairly for his behavior. Or if I used to be in school with someone who is now doing poorly financially, I get whacked. Now consider that this person might have been my close friend in 6th grade, but we grew in different directions. Where is the relevance here? Where's the logic in that? Pulling this info from social graphs as augmentation is a whole lot different than simply creating a full profile from your graph in the absence of real financial data. Lagging or not, how I paid my credit cards over the past 5 years is going to tell you a lot about how I treat money. Not so much about what I'm tweeting tomorrow.
    • roc 15y ago
      Social grading gives them free reign near-uniformly depress credit scores to make everyone appear less credit-worthy. This allows them to increase average rates and maintain low lending volume, under the cover of credit scores that appear low in historical context. When it behooves them to begin lending again, their lending to people with low(-in-historical-context) credit scores will be paraded about as virtue. There is simply no-one who is that far removed from a black sheep or friend/family member who's fallen on hard times. Not even during good economic times. Certainly not given the way people friend one another on these sites. Any grading of people based on social connections will drag nearly everyone down, potentially in a self-reinforcing cycle.(higher rates push more people into worse economic situations, lowering their credit score, reflecting negatively on their friends who now pay higher rates, etc)
• darksaga 15y ago
  Why are we all assuming people would naturally have a large social media presence in the first place? If I have a 790 credit score and no Facebook account, do I get a higher rate? Now you're looking at discriminatory practices based on the fact I don't engage in social media. This is a VERY slippery slope these industries are going down.
  • khafra 15y ago
    The purpose of a credit score is to serve as a discriminatory practice.
• cstross 15y ago
  My social graph doesn't tell you anything useful about me. What it tells you about is people who like the books I write. Someone sends me a friend request? I auto-friend them unless they're an obvious spambot. It doesn't mean they're my "friend" or someone I know IRL; probably 80% of my FB "friends" live in parts of foreign countries I haven't visited. I don't use FB for social purposes, I use it for marketing communications. (EDIT: Paradoxically, it turns out that many of my real friends aren't hooked up to me via FB. And none of my relatives -- except one nephew -- even have FB accounts.) This wouldn't be a problem except for Zuckerberg's sociopathic insistence that we all have just one unitary identity. Groan.
  • patio11 15y ago
    The wonderful, terrible thing about this is it literally doesn't matter whether the social graph says anything useful about you. It only matters that it says something which, when added to existing data sources, is a tiny sliver more accurate than the bank's internal risk scoring when aggregated over 100,000 people who happen to include you in them. If you happen to be misjudged by the algorithm, that isn't in itself a problem.
  • dextorious 15y ago
    """My social graph doesn't tell you anything useful about me.""" It doesn't matter. Someone can use it as saying all about you, anyway.
    • cstross 15y ago
      Right you are. Now extrapolate. What if I'm not an exceptional sparkly unicorn? At least credit scoring on the basis of repayment of prior debts is linked to your own actions.
      • jgw 15y ago
        You're not?! I'm unfriending you on Facebook. (The upside of this is that your credit rating's on the uptick!)
  • 15y ago
• jrockway 15y ago
  The good news is that you don't actually need credit. Rent from someone you meet on Craigslist, spend only what you earn, ride your bike or use public transportation (to avoid mandatory insurance).
  • dextorious 15y ago
    And what about when you want to build a business, Einstein?
    • there 15y ago
      good news: companies are people! let the company build credit.
    • jarek 15y ago
      Boot, meet strap.
      • dextorious 15y ago
        Not all companies are software startup to bootstrapped on ramen and determination. Some require actual buildings, expensive equipment, etc before they can even exist. A restaurant is a case in point.
        • jarek 15y ago
          Strictly speaking with a restaurant your largest expense, rent, is ongoing rather than upfront. Your point in general is valid, though I would argue that for someone truly motivated to make a point, it's not impossible to start with smaller businesses (incl. non-software businesses) or a bunch of savings and progressively work your way up to kick-starting larger business.
    • nvarsj 15y ago
      You have a point. Without credit, much small business would simply not be able to exist, or have ever existed in the first place. It's one of our fundamental paths for economic mobility.
• byrneseyeview 15y ago
  It's very hard to argue against this. Either your social network is a good signal, or it's not. If it's not a good signal, the people who use this information are going to lose money--they will quite literally pay for being wrong. But if it does work, then overall mortgage rates will marginally decline. Better information will lead to better choices, so mortgages will become less risky overall. Some people will suffer, but keep in mind that when those people oppose this, they are saying "I want to hide material information from the people with whom I do business; if they knew the truth about me, I would get a worse deal." That's fraud. Yes, there will be false positives. And it's easier to visualize being the victim of one of those than it is to visualize the tiny collective improvement in human welfare that tends to result from better decisions. I would be interested in an argument that applies in this specific case, but doesn't apply to the general class of rough but useful heuristics, like "Kids with bad grades who drive recklessly are probably less responsible than 40-year-old moms who drive minivans, even though there is some C-student with a red car who is safer than some particular 40-year-old minivan-driving mom."
  • icebraining 15y ago
    But if it does work, then overall mortgage rates will marginally decline. Or the banks will just raise the profit margins. Some people will suffer, but keep in mind that when those people oppose this, they are saying "I want to hide material information from the people with whom I do business; if they knew the truth about me, I would get a worse deal." That's fraud. What about "my bank has no business spying on who my friends are or what I do on my free time"? This raises the cost (possibly prohibitively, if the number of people who refuse to give out an account is so small that banks can outright refuse credit to them) to anyone who isn't willing to sell out their privacy, and more importantly, their friends'. And of course, people like me who just don't have an account are outright fucked.
    • byrneseyeview 15y ago
      Banks are in a competitive industry; if their costs go down, they'll cut rates to increase sales, unless there's some implicit or explicit cartel behavior that keeps them in line. But if that were the case, you'd expect banks in general to be more profitable. Your bank is in the business of figuring out how likely you are to repay loans. They'll probably ask you these questions, since answering them makes you a better customer. But refusing to answer puts you in a low credit-rating bucket. Banks already use your transactions to figure out how creditworthy you are. If you want to avoid that, you can do all your business in cash, but you will pay for it if you ever want a mortgage. All they're doing is offering you the option: if your privacy is worth, say, 2% per year on a $100K mortgage, then go ahead. But for lots of people, privacy has value, but not an infinitely high value. You can argue that it's unfair for your desire for privacy to imply that you have something to hide. But if you do, better blame the people who do have something to hide and claim that they just believe in privacy: if such people didn't exist, you would be able to maintain your privacy at a much lower cost. Maybe you could use a real-world example. Let's say you're hiring an employee, and your employee casually mentions that he changed his name last year. "What was your original name?" "Not telling." "Did you do anything that would give you a good reason to change your name?" "Not telling." "Can you tell me who you used to work for under your previous name, and why you're no longer there?" "Ugh. Stop trying to violate my privacy. Just assume that I have good reasons not to tell you information that you would use to make a reasonable decision; it's totally unfair to lump me in with people who would do that to cover up something terrible they've done, or some unsavory associations they have. I'm not one of those people. Trust me."
• pasbesoin 15y ago
  Some things simply need to be outlawed. Unless you truly like the idea of ending up with a caste system. It's a slippery slope.
• brown9-2 15y ago
  So, is it actually accepted that a person's creditworthiness is correlated to the creditworthiness of the people they socialize with?
  • code_duck 15y ago
    The assumption that I socialize with the people on my Twitter or Facebook lists is incorrect, also.
    • drivingmenuts 15y ago
      The implied assumption (not you, the credit industry) that I value a relationship with a bank more than my friends is incredibly wrong. I would gladly take a bullet for some of my friends. I would watch a banker drown with no guilt whatsoever on any day.
  • tedunangst 15y ago
    If they weren't correlated, there'd be no benefit to the bank using that information.
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• omouse 15y ago
  I love how we're all being reduced automatons thanks to statistics and I especially love how programmers seem to have a data mining fetish that will only help governments, corporations and banks, the same groups that repeatedly screw things up. Also, won't some of this count as discrimination based on age, race, gender, religion, political beliefs? At least in some tangential sense?
• LiveTheDream 15y ago
  If this were to get big, the industry to game it will be even bigger. Pay $500 to friend some high-credit-rated people on Facebook to get a few points off your loan. Then un-friend them after the loan is established.
  • feralmoan 15y ago
    Its an amazing opportunity for brokers and ilk geared for risk to join cracker circles privy to lenddo et.al algo exploits, creating a credit-metric marketplace. Game on.
• namank 15y ago
  How is this not an edge case of discrimination? Isn't this saying you are guilty by association? I see this as an infringement on my civil liberties. This fails to take into account the element of CHANGE. Change that is as much a function of time as it is of a person's choice and circumstance. The idea may succeed; hell, it WILL succeed given the nature of financial institutions and the online social infrastructure that exists today but it will be an aberration in the name of progress.
  • sliverstorm 15y ago
    How are your civil liberties infringed by receiving a different rate from someone else? Why are you not busy protesting car insurance? Also, it's not "guilty by association", it's "risk by association".
    • namank 15y ago
      Car insurance applies to the skill of driving. And the part mandatory by law is third party insurance. So essentially, car insurance is not for your protection, its for the person you hit. The concept of owner's insurance is so you can also pay for your own car after running into a pole - this is optional. Withholding financial goods from a person based on their social interaction is different from suspending their driver's licence because money is a need and is directly related to the very survival of a person. Money, in our society, is a very fundamental requirement; driving licence is not. So this idea imposes a very real threat on my very existence. And thats why its an infringement on my civil liberty. Judging a person's financial aptitude based on their social actions is dangerous. Not to mention the fact that social interaction isn't currently scientifically quantifiable and so all the conclusions you draw from the data are essentially opinions of the experimenter, nothing more.
• GFKjunior 15y ago
  What if the only online profile I have is a GitHub account? But seriously, 2016? I expect a totally new social networking platform to emerge by then.
• drivingmenuts 15y ago
  This is an opportunity. The same tech that the military uses for propaganda can be used against banks that scan your profiles.
• aniro 15y ago
  response from a friend of mine: "I would like to be able to run an antivirus style application on FB that identifies relationships that are a threat to my credit profile, career prospects, and caste. I want to know who to ditch."
• sbov 15y ago
  They may find this useful at first, but if they weigh social media heavily wouldn't it be too easy to game to be useful in the long run? It isn't that hard to have 2 Facebook or twitter accounts.
• andrewhillman 15y ago
  This is either really clever or frightening if its used beyond marketing. smart marketing but somewhat unethical. Interesting nonetheless.
• teyc 15y ago
  How about the TV shows you watch, the books you read, and whether you call things "Grape Juice" or "Grape Drink". The problem with bad Fico is that it in itself can create self-fulfilling prophesies. Just look at Italy.