Any person on top of their finances knows you have to be conscious of your credit score. A good credit score can make things much easier for you: lower payments on car loans, insurance payments and home loans. Typically, the Fair Isaac score (FICO) is used to determine your credit based on variables like what you owe, credit types you have, your payment history and length of your credit history. Credit scores range from 900 (spectacular, Superman-like credit) to 200 (weaker than Superman wearing a kryptonite leotard credit).
The higher your credit score the better, so practicing smart financial habits will work out for you better in the long run. Will this always be the standard, though? At the rate technology has developed, will a more efficient way of checking a person’s credit be found? It’s a possibility. As CNN Money reported earlier this week, some lending sites are using non-traditional means of approving borrowers for loans: social media, or anything else that can be discovered on the web about you.
Lenddo is a centuries-old concept that seems radical today. Using the site’s own words, “Lenddo is the world’s first online platform that helps the emerging middle class use their social connections to build creditworthiness and access local financial services.” An instructional video on the site puts it in historical context: In the old ages, if you wanted to take out a loan from the bank or put something on a tab from a shop owner, they had to know you well enough (and ask your associates if you’re reliable) for them to even think of it.
Lenddo takes this to the modern age by using your social media connections in and outside of Lenddo’s community to determine your trustworthiness. Your character is judged on a scale of zero to 1000, based on your social data, trusted connections and financial performance. Your trusted connections and financial performance are within the Lenddo community; your trusted connections are the people that you associate with on the site. If they miss a payment it’ll reflect negatively on you and vice versa. If you financial performance is good on the site (you make early or timely payments), it’ll look good for you and your community.
The real head-turner is the use of your social data in this process. It tracks the people you have the strongest connections with (typically family or close friends) and considers that aspect only if you don’t have much info in the previous two categories. The site assures it won’t consider random people you’ve added as friends over the years, but the idea of a community’s opinion determining your financial success is a compelling idea in a social media-driven society.
As of now, Lenddo only offers loans in the Philippines and Colombia in an effort to boost the middle class in those areas. What are your thoughts on social media being integrated to your loan assessment?