An increasing number of lenders and insurers are using online activity, including social media posts and profiles, to help them make judgements about the credit-worthiness of their customers.
According to privacy campaigners and credit reference agencies, lenders use algorithms and detailed models to categorise their customers into ‘types’.
Fintech Company ‘Big Data Scoring’ helps lenders and insurers to make decisions based on tens of thousands of data points collected from a host of internet sources. These include blogs, web pages you’ve visited and social media. The information is particularly useful to lenders where the applicant does not have a full credit history.
Models like those used by Big Data Scoring will look at, for example, how active you are on Facebook or Twitter, the type of activity, and what it says about your personality. They may also look at the devices you are using to access the internet.
Online activity isn’t the only factor a lender will take into account when assessing your loan application. The data also includes postcode profiling, which assesses how creditworthy someone is likely to be, based on where they live. According to Justin Basani of ClearScore, banks take the approach of “birds of a feather tend to flock together”. Living in an area where credit scores are typically low can go against those looking for a loan, especially if they already have some credit issues or have not been on the electoral roll for very long.
Postcode profiling is likely to hit young, first time buyers – who can’t afford to live in a wealthier area – hard. Other groups that may be adversely affected are the elderly who have never owned a credit card and paid off their mortgage years ago, those who always relied on their partner to take care of finances and credit, and those who have just moved to the UK.
Lenders and insurers are reluctant to talk about exactly what data they take into account or how much bearing it has when making a lending decision. Communications Director Pam Cowburn of the Open Rights Group notes that the information is available in the public domain and would-be borrowers should expect lenders and insurers to do their research. She suggests those looking to apply for a mortgage should be careful about what they post. “Gambling stories, wild nights out and lavish spending boasts should probably be avoided.”
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