Facebook and Twitter can hurt your credit score

Facebook and Twitter can already get you in trouble with friends, family, and your significant other. Many people have discovered affairs and cheating through Facebook and Twitter. Well now, the social media networks have a new trick. They can expose enough information for banks and credit agencies to determine your credit risk. Some banks are looking at this right now, and, according to BetaBeat, may implement it soon. One company already uses the method and is probably the first to implement it. Lenddo is a micro-lending firm based out of Hong Kong.The company currently serves the Philippines, but did hire an ex-Google chief to direct the upcoming Americas division.

The company asks for your Facebook account. Then it asks for access to Gmail, Twitter, Yahoo, and Windows Live. The company's algorithm is a secret, but the main metric is who you are friends with on Facebook and Twitter and what Lenddo knows about them. Jeff Stewart, the CEO of Lenddo, said the following:

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.

That's not all Lenddo does, as the site warns those who might default on a loan:

Failure to repay will negatively impact your Lenddo score, as well as the score of your Lenddo friends. Lenddo MAINTAINS THE RIGHT TO NOTIFY YOUR FRIENDS, FAMILY AND COMMUNITY if the borrower fails to repay, however, this is only done after several notifications to the borrower and an attempt to work out a payment plan.

Matt Thomson, Vice Preesident of Platform at Klout, said that banks have been approaching Klout to ask the company about gauging credit worthiness. For those who may not know, Klout gauges your influence based off your social media activity. He says that the list of banks is confidential, but is essentially "the who’s who of banking."

The credit agency known as FICO has said that they are always looking into new methods and processes to better serve their customers' needs. In other words, FICO and the other other two U.S. agencies, Experian and TransUnion, will probably use social media at some point to gauge your credit risk.

However, media theorist Douglas Rushkoff dismissed the notion that social media-based credit scoring is an erosion of privacy. He stated the following in regards to the idea that this is a nightmare scenario:

They already know everything about you—more than most of us realize. If anything, the addition of social networking information to this data mining will help us come to some understanding of how much more these companies know about us than we know about ourselves.

He also pointed that if all of this leads to people lending to each other, it could be empowering:

Instead of everyone outsourcing their savings, investments, and borrowing to truly evil institutions who use what information they about us simply as an excuse to drain more money from us, we would invest in one another.

This should be interesting to watch as credit agencies and banks develop this idea more and actually implement it. For the time being, however, choose your friends wisely.

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