How Bad Moves on Social Media Could Damage Your Credit Score

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USA, Illinois, Metamora, Young man using tablet pc in living room
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Dramatically quitting your job via viral video might seem appealing after your boss starts screaming at you -- again-- but for the sake of your credit score, it's probably not a good idea. According to a recent report from the Wall Street Journal, lending companies and Fair Isaac (FICO) might soon start using social media data to help determine your credit score.

Your credit score is used by lenders to assess your level of risk, which in turn affects your interest rate. Just like with your grades in school -- and pretty much everything except golf -- the higher the score, the better.

What Contributes to Your Credit Score?

"There are five things that go into your score," says certified financial planner and Workable Wealth founder Mary Beth Storjohann:
  • How you pay your bills accounts for 35 percent.
  • Amount of money you owe and the amount of available credit accounts for 30 percent.
  • Length of credit history is 15 percent.
  • Mix of credit accounts for 10 percent. This involves both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans.
  • New credit applications is 10 percent.
Why Would a Company Want to Use Your Social Media Data?

Let's face it: People sometimes lie about their financial situations. Someone might claim to be gainfully employed, then turn around and post a Facebook (FB) status about quitting his job.
Or he might tweet that his boss is a dirtbag and promptly get a pink slip. Lenders can use social media profiles to verify the legitimacy of applications, among other things.

Remember when your parents said hanging out with the wrong crowd would reflect poorly on your reputation? Well, lenders could think the same and use social media data to examine the company you keep, at least on the Internet. The caliber of your Facebook friends can play a factor in how attractive you are to lenders.

Privacy Isn't the Only Concern About Mining Social Media Data

Invasion of privacy might be your first beef with companies examining your social media data to determine your trustworthiness, but what about the possibility of inaccuracies?

Storjohann, who quit her full-time job to launch her own financial-planning business, is concerned that FICO and other companies might jump to conclusions. For instance, if a lender assumes she no longer has a steady income, how might that affect her credit score?

Lenders mining Facebook and other social media sites might not realize that Storjohann, for example, is part of a two-income household with a savings cushion built up to finance her business.

Could Social Media Data Mining Help You Secure a Loan?

If you come off as squeaky clean with a network of responsible friends, it's possible that social media can help you secure a loan. There are also other options for bolstering your appeal to lenders.

It may be rare, but there are recent grads who made it through college without debt, paid for a car with cash, and only had one -- or no -- credit cards.

The credit report and score system focuses largely on our debt, so a lack of loans and credit cards could actually result in little or no credit. Companies such as eCredable help solve this problem by offering an alternative to the traditional FICO credit score.

ECredable allows people to use bills not traditionally reported to credit bureaus in order to establish their trustworthiness.
ECredable users can verify their bill payments to utility companies, cellphone providers, insurance companies and others service providers in order to create "alternative credit," as the company calls it.

Under the Equal Credit Opportunity Act, lenders asking for a credit check are required to accept alternative credit accounts.

The Federal Housing Administration, Fannie Mae and Freddie Mac created a tiered system for the verification and use of alternative credit, which eCredable uses as the basis of their own process.

Protect Your Credit Score

Whether or not social media data becomes commonly used to determine our credit scores, it's important to be proactive with our credit reports. Your credit report is used to create a credit score, so you should be diligent about checking at least once a year for inaccuracies or fraud in your report. You can check free through annualcreditreport.com, which offers copies of your reports from Experian, Equifax (EFX) and TransUnion. You can even space out when you want to see the reports so you can check for free three times a year.

Unless you plan to never rent an apartment or get a mortgage -- and you pay for all your purchases in cash -- your credit report and credit score matter. You should be vigilant about protecting them.

Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She's also the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. Popular posts include:



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17 Comments

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Andria Smith

Thanks Erin for your well researched article on Social Media Score . Consider SOCIOTA to get your Social media score which combine your all Plateforms and also tells the ways to improve it.
visit at http://sociota.net

April 25 2014 at 2:37 AM Report abuse +1 rate up rate down Reply
1 reply to Andria Smith's comment
Amitesh Misra

Sociota looks like a good option for scoring Social Media Profiles.

Do I need to be the owner of the page/account to see its score or can I see the scores of any page/profile?

May 12 2014 at 4:03 AM Report abuse +1 rate up rate down Reply
jrexmarda

Easy stay off social media sites or invent a squeaky clean personna. Example: My boss is the greatest man that ever lived. I love working for him and will become his righthand man before long. Sit back and watch your credit score soar.

January 16 2014 at 12:39 AM Report abuse rate up rate down Reply
ellenganop

So does posting cat videos help or hinder my credit worthiness.....?

January 15 2014 at 7:28 PM Report abuse +1 rate up rate down Reply
jimmy_branch

The Government is supposed to get by on collected tax dollars but instead is running the printing presses non stop and leaving little IOU's and making little confessions to the tax payers thru press releases while living the Rock Star lifestyle and laughing all the way to the Bank.


It's time to eliminate the 1% and their puppet defender's.

January 15 2014 at 4:47 PM Report abuse rate up rate down Reply
ctheleroys

Enough IS ENOUGH!! What next, if I don't eat enough vegetables today and wash my car every week I will lose my home loan because the credit score dropped and then what?...I get deported too? Big brother can back way the HECK OFF!

January 15 2014 at 4:25 PM Report abuse +1 rate up rate down Reply
TINKDAY

What hurts your credit score ,is when the crooks that run our government, our banks, wall street and to many of our corporations, especially the insurance companies, cost this country tens of millions of good paying jobs, to be only partially replaced by part time low paying jobs, trillions of dollars lost ,plus trillions of dollars to bail out wall street, the banks and the rich, all put on the backs of the tax payer in the form of debt. And of course, the bond rating agencies that committed so much accounting fraud and of course the SEC that has been and still is worhtless. So you want to protect your credit, you can not, until you get rid of every democrat and republican that holds office in every level of government.

January 15 2014 at 3:50 PM Report abuse +3 rate up rate down Reply
filmnd

The credit reporting industry is one of America's biggest scams. It forces you to borrow to get a good score, and when you do your score dramatically drops. Now, they want to invade your personal lives through social media. The end game for the big three reporting companies is to keep your score as low as possible to provide lenders with a basis for higher interest rates and pumping up profits. The only thing credit reporting companies should be concerned with (if anything, because IMO they are unnecessary), is if you pay your bills on time.

January 15 2014 at 3:22 PM Report abuse +4 rate up rate down Reply
karengroovi777

Facebook sucks. Anyone can post anything to anothers news feed and get them into trouble with their employers , and who wants everyone looking into your business anyway? Social media is trouble period , we all use some form of it , but at least not being on facebook is a lot less troubling than being on it. No ones credit score should be based upon facebook . It is also unconstitutional to force people to join it to comment on other sites like huffington post . I loved HP . Too bad I can't post any more cuz I refuse to join facebook . Shame on you HP.

January 15 2014 at 2:44 PM Report abuse +6 rate up rate down Reply
jimmy_branch

Nuke Crapbook and S_ _ter only the dumbest 99% idiots use this garbage.

January 15 2014 at 2:34 PM Report abuse +3 rate up rate down Reply
phil

Cash...and Barter. Why in hell would you allow ANY company to determine your worth as a human being? The goal should be to have a ZERO (0), FICO score! Don't borrow money, and you'll never be in debt! Disagree? Good. Companies need SHEEPLE to fleece, like politicians need votes.

January 15 2014 at 12:57 PM Report abuse +2 rate up rate down Reply