Your Credit Score: You Ain't Seen Nothin' Yet

If you, like a lot of businesspeople, have been wrestling to boost your credit score, get ready for a figure-four necklock. There's a new credit score in the ring and it's a monster, armed with mechanisms to assess your creditworthiness that make FICO look like a 98-pound weakling.

It's dubbed the "super credit score" and, as it's now being perfected by a group of cutting-edge lenders, it judges your creditworthiness not by your financial data but by information on your social circle, your interests, your hobbies -- in other words, by how you live your life.

An article titled "9 Trends Reshaping Risk Software" at AmericanBanker.com provides an inside look at the growing popularity of the super credit score. The third trend, according to the website, is "looking beyond the credit bureau report to assess consumer creditworthiness."

"One idea banks are toying with is that of incorporating social media data into assessments of credit risk, for instance, by considering the credit scores of a person's friends in addition to that person's own score," reads the article.

A number of banking startups are not only "toying with" the idea, they've built their business models on it. One is a Hong Kong-based microlender called Lenddo, recently spun out of the FinTech Innovation Lab, an incubator for Wall Street startups. Lenddo boasts it is "the first credit-scoring service that uses your online social network to assess credit."

As described in this article at tech site BetaBeat, the first thing Lenddo asks of applicants is for their Facebook account, followed by their Gmail, Twitter, Yahoo!, and Windows Live accounts.

The author of the BetaBeat article applied at Lenddo and was rejected because "you need at least three connections with scores above 400 in your Lenddo trusted network."

"We think that in the age of the Internet you should be able to establish your reputation and your identity through your social graph, through your on- and offline community, and use that to get access to financial products and information," Lenddo Chief Executive Officer Jeff Stewart told BetaBeat.

In other words, if your friends all live their lives in a saintly and creditworthy fashion, Lenddo will look favorably upon your application. If they don't, it won't. In the world of Lenddo scoring, your friends' financial slip-ups will damage your credit score and, conversely, your mistakes will dent the scores of your friends. "Failure to repay will negatively impact your Lenddo score, as well as the score of your Lenddo friends," warns the site.

Worse, if you stumble financially, Lenddo will tell the world all about it. "Lenddo maintains the right to notify your friends, family, and community if the borrower fails to repay," the site says.

Neat.

It's unlikely that mainstream banks are using Lenddo-style techniques to judge your creditworthiness. At the moment, there's too much data to crunch and insufficient tools to crunch it. But they're preparing. Lenddo says major banks have already approached it to inquire about its credit-scoring system. And an online/mobile bank similar to Lenddo, called Movenbank, is cooperating with Klout to use your Klout score, among other things, to judge your creditworthiness.

So are you ready to purge your Facebook and Twitter accounts of any financially irresponsible friends and family members? In the brave new world of the super credit score, you may have no choice.


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