There is an old saying: "You are known by the company you keep." This adage has become more true than ever with the advent of technology that allows financial institutions to examine your social connections and make determinations about your creditworthiness based upon that information.
Imagine being denied for a loan because one of your Facebook friends has defaulted on his or her loan. It could happen. Lenddo, according to a CNN Money article, determines if you are Facebook friends with someone who has been delinquent on a Lenddo loan. Your level of interaction with that person is used as an indicator of your own judgment.
"It turns out humans are really good at knowing who is trustworthy and reliable in their community," Jeff Stewart, a co-founder and CEO of Lenddo, told CNN Money. "What's new is that we're now able to measure through massive computing power."
Not everyone agrees that social connections are predictive of borrower behavior.
John Ulzheimer, a credit expert at CreditSesame.com, believes FICO, even though it only uses a few data points, is a very good indicator of creditworthiness.
"To me, using social media is a little bit dangerous," Ulzheimer told CNN Money.
Would you "unfriend" some of your current Facebook friends if you thought it would increase your chances of getting a loan? Do you believe social media connections are indicative of a person's judgment and, therefore, a sound basis for making loan decisions? Let us know in the comments.