Financial companies using social media to connect to customers
Vince Vitrano, Stephanie Graham
BMX biking is Adam Grandmaison's passion and business. He sells cycling t-shirts, hats, and stickers on his popular website. When his company started to soar, he applied for a small business loan to launch a new smartphone app. But Adam explains there was a problem. "The loan company was concerned about the fact I have really bad credit."
So the lender hit the brakes on Adam's application. That is until Adam showed them his company's facebook page with more than one hundred thousand "likes" and his twitter account with more than twenty thousand followers
The loan company decided Adam's BMX biz was worth the risk.
Adam adds, "A strong social networking presence is that it really kinda acts as your currency in terms of it represents who you are online."
So can your online reputation really mean money in your pocket? In some cases, yes. A number of new financial companies using social media as one way to evaluate applicants.
Start up company 'lendup' still reviews loan applicant's credit reports, just like a traditional bank. If a borrower agrees, lendup also checks out their Facebook and Twitter profiles to get a sense of who they are.
Sasha Orloff works for lendup. She explains what they look for. "How long have people had their account? How strong is their network? How diverse is their network? How much do they interact?"
Lendup says it doesn't review pictures people post, or groups someone 'liked'.
"We don't look at anything that could be construed as discriminating against somebody for things like race or religion or color or marital status or age," Orloff assures.
'On deck' lending uses review sites like 'Ggoogle Places' and 'Yelp' to check out small business loan applicants. Consumer experts worry this trend could hurt people who don't use social media, or want to keep their accounts private.
John Bryeault works for the National Consumer's League. He says there are concerns about people who post fake info online. "There's a lot of potential for consumers to game that system and potentially for people who may not be creditworthy to appear credit worthy."
The FTC is equally concerned, and is watching the trend closely. Could it be possible credit reports, the traditional gauge of 'credit worthiness', are becoming passe? 90% of top U.S. lenders still rely mainly on a person's FICO or credit score to make decisions. So could social media be factored into a future FICO formula?
Anthony Sprauve with FICO explains, "We are always looking at different things, social media will fall into that, but right now its still too early."
Adam says his social media 'rap' was very predictive of his success, and the loan got his company's wheels spinning. "It's going super well, I mean we're making payments on it and it should be paid off in six months."
The FTC says it's important that anyone who is turned down for a loan is told exactly what information the lender used to make that decision, whether it's a credit report, employment history--or even information from a social media page. This gives loan applicants the change to correct any information that may be listed incorrectly.