Banks are now using a new tool to judge who might be good loan applicant -- looking at customers' friends on Facebook.
According to Betabeat, a new crop of startups are creating algorithms for banks to gather social network data on customers and potential customers. Part of the reason, aside from marketing, is that banks assume that friends have similar credit scores and assets. But there are more nefarious reasons, too. Brett King, founder of online bank Movenbank, said, "At best, your credit score is about 60 days behind. What we’re trying to do is look for things that reflect the likelihood of a future default, rather than what’s happened in the past.”
It also means that banks will have access to information they aren't supposed to have, such as race, marital status or sexual orientation, which could lead to discrimination. But most believe that the ramifications are that banks could deny someone a loan or give them higher rates based on the company they keep.
But probably the most disturbing idea comes from the Hong Kong-based Lenddo, which will notify friends, family and acquaintances if you default on the loan. Imagine that tweet or Facebook status update!
Businesses, including banks, already have a lot of information on us from our Internet use and credit history, so it makes sense they will soon want access to our Facebook accounts. We think this also means that user should be circumspect about what they post online, because not only colleges, employers, insurance companies and law enforcement agencies are looking at your vacation photos, but your bank as well.