10-Aug-2018 written by : FSI-Team
In this age of hyper connectivity, a strong virtual presence is a reality for everyone. In other words, most of us are present on social media platforms and do not shy away from expressing our opinions and preferences about people, places and things that leave an impact on us socially.
Our social media activity thus proves to be quite revealing of the lives we lead, much more than we are aware of. The power of social media is being harnessed by e-retailers all over the world to send out customised advertisement links that shows up on our social media pages, and we find ourselves navigating out to them more often than not.
When social media activity is already in use by e-commerce giants, can credit bureaus be far behind? After all, one’s credit score is a barometer of one’s financial health and is used to tell a prospective lender about how credit worthy he is. Several credit agencies in developed nations are thus already making use of an individual’s social media footprint to assess his creditworthiness in addition to the traditional parameters. In India, although social media activity is not taken into consideration while computing your CIBIL report yet, there is reason to believe that “alternative scoring” models can be a reality in India soon.
An alternative scoring model takes into consideration the social media activity of an individual from popular social media platforms such as Facebook and Twitter and also gauges his professional qualifications, job status and future prospects from professional social media platforms such as LinkedIn. This is as compared to traditional scoring model that considers various aspects such payment track record, credit utilisation, mix of credit, number of enquiries made for credit products etc to arrive at a three digit CIBIL score.
Already, there is anecdotal evidence to believe that the biggest banks of the country are strengthening their risk analysis models internally by gathering data from social media platforms to assess the creditworthiness of potential borrowers. They are also tracking data being captured from Google Maps, payment to radio taxis etc to analyse risks associated with potential borrowers. This, is fast becoming a trend among traditional lenders who must adapt and implement change at a time when fintechs and other non-traditional lenders are offering cheaper, custom-made credit solutions to a larger target audience.
Thanks to the use big data and analytics, it is already possible for individuals with a low CIBIL score to obtain credit products from peer to peer lending platforms, which are virtual credit marketplaces which make it possible for people to opt for customised loan products at competitive rates of interest. Already, such platforms use atypical parameters such social media information of a potential borrower to assess whether he will be able to repay his dues on time. Alternative scoring is thus very much a reality in the present day.
To cut a long story short, your social media footprint is relevant and can indeed influence your lender. Although it does not impact your CIBIL report yet, that relies on the traditional scoring model to compute your credit score, it may only be a matter of time, till social media data is taken into consideration alongside the traditional scoring model by CIBIL, the leading credit rating agency in India.
While there are naysayers within the system, who are unsure about the use of social media to asses creditworthiness, because they feel it is subject to interpretation, it remains a fact that the social media footprint of a potential borrower is too big to ignore. Besides, lenders are keen on it because it opens up a huge untapped market of people with people with no or low CIBIL score, who could not access traditional banking products thus far.
Thus, as a borrower, it is a good idea to use your social media accounts responsibly, for you are being watched.