Here in Germany it's pretty common.
I'm living in an apartment building where it is impossible to get a credit card. It's not only me - all neighbors I asked have the same problem.
Looks like one of our neighbors has a catastrophic credit rating and is pulling down the rest of us.
I heard similar stories from friends who were able to get a loan only after moving.
Our society does better when we communicate with each other. As in, "united we stand, divided we fall".
If we are not to turn entirely into a perpetual exercise in "pecking order", there have to be some limits upon what can be "punished" -- commercially or otherwise.
So, take your "social network credit risk" and shove it.
If I had a time machine and could go to the future and see who would pay back their loans and who wouldn't, that would be ideal. But we don't have that, we can only make predictions by looking at data that happened to correlate with that in the past.
The article is talking about a private company using publicly available data as a factor in determining whether or not to extend a loan to you. I think it's kind of shitty, but I don't know that it's any different than say using gender as a factor.
http://www.propublica.org/article/disparate-impact-and-fair-...
"Borrowers grant Kabbage access to their PayPal, eBay (EBAY, Fortune 500) and other online payment accounts, disclosing real-time sales and delivery information. The company says it can determine a business' creditworthiness and put money into its account in just seven minutes.
Once a small business is getting credit from Kabbage, it also has the option to link up its Facebook and Twitter accounts to the site, which could provide a bump in its "Kabbage score." The small businesses that do are 20% less likely to be delinquent on their loans, Golin said.
"The article's real title is a lot better, although still link baity: "Facebook friends could change your credit score"
"Dear insurance companies, I'm shopping for a policy. Please fill out this bid form so I can verify your business history, tax compliance, carbon footprint, employee demographics, political contributions..."
Unfortunately I expect this to become another "illegal datapoint" that is illegal to take into account. People hate the idea of being judged for seemingly arbitrary things. Which makes sense. But if it actually does correlate with the truth, if it actually makes predictions more accurate on average, why shouldn't it be used?
(This isn't a real issue for me because, like the nouveau cool, I deleted my Facebook.)
Yes, you could argue the person doing the digital ostracizing is a craptastic piece of shit, but the criteria for friendship shouldn't be creditworthiness. If I had to eliminate otherwise good friends (or funny acquaintances) because I know they've had problems paying their bills, I'd not be a happy bunny. It's trite to highlight this, but credit scores impact all kinds of things, from interest rates, availability of financial products, ease of getting a merchant account, and apparently, how easy it is to get certain jobs.
Where does it end? Phone records? Emails? Chat logs? Who you Tweet with most? CCTV hooked up to facial recognition software to figure out who you're going to lunch with?
There's nothing good about this and I hope their business fails.
I don't think in practice many people will change their friends over this, and this is only one piece of information being used, so it probably wouldn't have a huge effect if they did so.
Because statistics.
Correlation applies to populations of data points, not individual data points. Even if 99% of the data points have a certain feature (an extremely strong correlation), the 1% of outliers should not be penalized for being similar to the rest of the group in other ways.
To look at it another way, by not taking that data into account, you are making those 500 worse off. I don't see how that is preferable.
If we had a time machine to go into the future and see what loans would be paid back and which ones wouldn't, that would be ideal. But we can only guess. If our guesses aren't 100% accurate, are we saying we shouldn't try at all?
I doubt anyone cares about their credit score for the sake of the official number of their credit score, people care about it because of what it means when you want to buy a house, or take out a loan, or sign a mobile phone contract. If Facebook friends affect these things negatively (or positively), then I don't care whether it's because they change my credit score, or because everyone looks at these things as well as my credit score, either way it has the exact same effect.
Personally, I'd be happiest if I had a credit score of zero or whatever the number indicating non-existence is these days.
Nobody has to trust the popular credit rating agencies, and people are free to make their own ratings/certifications or start their own companies that do so (unless the government prevents that... which if so, is a problem with government not the rating agencies.)
Um... How does it determine your location? Your IP address? Cause that's really a good indication of where your computer is physically located. Hint, our work traffic is routed through company headquarters halfway across the world before reaching Kreditech's website. Now Kreditech thinks I am lying about where I am located. Great.
The Economist covered it a while back in developing nations - if your credit score suffers because of a friend you can exert social pressure on them to pay back the loan. You don't want to be known as a deadbeat to your friends so you are less likely to take out a loan you can't afford.
Though in that example the social network is an explicit opt-in I believe.
> "One such company, Lenddo, determines if you're friends on Facebook (FB) with someone who was late paying back a loan to Lenddo....
No explanation of the what the mechanism for collecting this is. Likely it's a matter of opting in to share your data through a Facebook app, an act whose culpability lies with the consumer.
> "Lenddo has about 250,000 members, but it only operates in the Philippines, Columbia and Mexico."
Um. Ok. Three sem-developed nations. It's journalistically incompetent not to explain what the relevance of those nations are to the operation of Lenddo, and why any of that is relevant to the American general public.
The only thing I learned from this was that CNN Money articles can be remarkably content-farmy and AOL-like, and HN readers can subdue their analytical spirit when it comes to piling on the criticism of an already-hated company (e.g. Facebook).
What a relief, since I deleted most of my facebook friends and left only two people on it. Although, from what I'm seeing, that could be a plus for some of these lenders!
