by Bethaney Wallace

In a time where credit rankings affect almost everything – homeownership, the ability to qualify for a credit card, obtaining a loan, etc. – there is now one more aspect that can stand in the way of a high ranking score. Where once credit scores were purely based on one’s ability to earn and pay back money, there is now an outside factor being put into the mix: social media accounts. But here’s the scary part, it’s not necessarily your social media account that can affect the rankings, but your online friends’.

In an article by Beta Beat last week, the magazine tells their story of applying to a loan company, Lenddo – the first loan co. to use social media as a decisive factor. Beta Beat said they first were asked to give their Facebook profile, then several other user names to online accounts, including gmail and Twitter. And then, they were denied for not having enough friends with high credit scores. (Just to be fair, as the story pointed out, even if they had qualified, they wouldn’t have gotten the money as Lenddo is based in Hong Kong.)

How Does it Work

Lenddo uses a “proprietary and secret” algorithm to help determine credit scores and loan-worthiness, according to the company’s CEO, Jeff Stewart. He also 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.”

When Beta Beat applied, they were told they’d need at least three friends with a score more than 400 in their “Lenddo trusted network.” It’s also probably safe to say that, because they are a magazine, their friend base (and therefore scores) are askew. But what about the social media enthusiast with fully paid loans who just happens to have a lot of “friends” who are bad with money? Will they be denied as well? This is one answer Lenddo’s new loan program doesn’t offer an answer to.

Who’s Next?

What about American banks? Will they be next to hop on the social media algorithm factor? I sure hope not. Yes, America has quite a few citizens to default on loans, to owe credit companies money. But there are also plenty of the financially-sound kind as well. Why should a person’s high school friend’s credit score affect their ability to buy a house or build a new one? Why should keeping in contact with someone with poor financial skills be a punishment? Isn’t checking individual scores enough? Monitoring a person’s friends’ credit scores is essentially judging them on something they have no control over. How many even know what kind of credit your best friends have? Sure you know whether or not they pay their bills, but who knows it they’re on time, or if they pay their credit card minimum or entire balance each month?

No word yet on Mark Zuckerberg (although Lenddo quotes his willingness to advance social media), as to how he feels about this next advancement to his multi-billion dollar invention. However, if this program does continue to grow, it could chance social media and online friends as we know it – taking online profiles from a way to keep in touch, to something that could actually affect the way you live your life.

Photo courtesy of Flickr.