How your social media behavior can impact your credit score

Find out how your social media activity can impact your credit score, and how to protect yourself when posting and engaging online.

Ever scrolled through your news feed, laughed at a meme, and wondered if your credit score just twitched? Or pondered if there’s a way to improve your credit score using your online behavior? Sounds ludicrous, right? Yet, this once seemingly absurd question is nudging closer to reality. 

Data from the Consumer Financial Protection Bureau indicates that about 1 in 10 adults are credit invisible or unscorable. To bridge this gap, some innovative lenders are turning towards the gold mine of alternative data: your social media behavior.

Take a moment and imagine the vast amount of information tucked away in your social media accounts. Every action forms a unique digital footprint, from your check-ins at a luxury hotel or posts about your latest shopping spree to how promptly you respond to messages. 

But here’s the twist: while you view these as mere online interactions, some lenders may see a revelation of your financial behavior.

The emergence of social media credit scoring

Once upon a time, credit scores were straightforward, based on traditional factors influencing credit scores like payment history, credit utilization, length of credit history, new credit inquiries, and credit mix. 

However, these factors often present an incomplete picture for many individuals, especially younger ones or those in developing economies. They might have thin credit files or even be credit invisible, lacking enough data to generate a credit score using conventional models. For these individuals, building credit without history becomes a significant challenge.

In the quest for a more inclusive financial system, the FinTech industry began searching for alternative ways to determine creditworthiness. This journey led them to an unconventional data mine: our social media behavior.

Social media credit scoring has changed the game for individual and business credit scores. These innovative models scrutinize a person’s digital footprint, diving into the labyrinth of tweets, Facebook posts, LinkedIn connections, and Instagram selfies.

Does a person pay their phone bill via a prompt on a Facebook ad? How quickly do they respond to messages? How often do they splurge on online shopping sprees bragged about on Instagram? Do they regularly check in at high-end locations? 

The answers to these seemingly innocuous questions, gleaned from social media behavior, could reveal much about a person’s financial responsibility.

Priyam Chawla, Marketing Manager at Jolly SEO, adds, “The emergence of social media credit scoring has set the stage for a narrative where our online behavior might dictate our offline opportunities. So, the next time you log into your favorite social media platform, remember: it’s not just about connecting, sharing, and exploring anymore; you might also be writing the story of your financial future.”

The potential impact of social media behavior on credit scores

Today, our online footprint isn’t just about our latest selfie or the avocado toast we had for brunch. It’s a compilation of our habits, preferences, and decisions. Astonishingly, our social media behavior might be playing an unexpected role in areas of our life we’d least expect: our credit scores. Let’s delve into the intricate web of how and why this could be happening.

1) Social media is a reflection of our lives

Whenever you tweet about a shopping spree or post a picture of your exotic vacation, you give a sneak peek into your financial behavior. 

Anthony Martin, Founder and CEO of Choice Mutual, explains, “For lenders, such behavior could be a goldmine of information. Frequent posts about extravagant expenses might suggest a carefree financial attitude, while shares about budgeting tips or financial workshops indicate fiscal responsibility.”

2) Social media can show stability and reliability

Beyond just purchases and expenses, posts about job promotions, workplace achievements, or milestones in personal projects are all digital affirmations of stability and reliability. Lenders want to know you’re dependable, and what better way to judge this than by the consistency of your online life?

3) Social media reflects the company you keep

Here’s how Linda Shaffer, Chief People Operations Officer at Checkr, puts it: “Remember the old saying, “birds of a feather flock together”? Your online network, the people you interact with most, and the financial habits they display could indirectly impact perceptions about your habits.”

It could bode well for you if your closest online pals are financially savvy. If they’re reckless spenders, it might raise a few eyebrows.

4) The photos you share can reveal a lot

While a sun-soaked beach picture might garner likes, it might also suggest you have the means for such vacations, hinting at a certain financial standing. Conversely, a DIY home improvement project might indicate prudence and resourcefulness, traits lenders appreciate.

5) Social media shows how responsive you are

Ever thought your online responsiveness could mean anything more than just being polite? In the eyes of lenders, how promptly you respond to queries, the tone of your comments, and the clarity in your communication could serve as subtle indicators of your organizational skills and seriousness, traits intrinsically linked to financial reliability.

Three pros of using social media for credit scoring

Here are three pros of using social media for credit scoring.

1) Holistic financial picture

Traditional credit scores often overlook aspects of a person’s financial situation. Social media, on the other hand, can paint a more holistic picture. That Instagram post of your latest tech gadget might hint at your spending habits. A LinkedIn update about your promotion could signal increased financial stability.

2) Financial inclusion

There are currently 1.4 billion unbanked people globally, according to The World Bank. These people lack a credit history, rendering them “invisible” to traditional credit institutions. However, social media could provide an alternative avenue for assessing creditworthiness, helping to bridge the financial inclusion gap.

1) Real-time updates

Unlike traditional credit scores that are updated monthly, social media can provide real-time insights into a borrower’s situation. Rapid changes in financial circumstances could thus be flagged earlier, potentially reducing default risk for lenders.

Three pros of using social media for credit scoring

Here are three cons of using social media for credit scoring.

1) Privacy concerns

The idea of lenders scrutinizing your social media to determine creditworthiness might send shivers down your spine. It’s a valid concern. Sharing personal life events and opinions is one thing, but having them dissected for financial insights could be perceived as invasive.

2) Data manipulation

With knowledge of the system, individuals may tailor their online behavior to game the credit scoring mechanism. This distortion could lead to inaccuracies in credit assessments, defeating the very purpose of the exercise.

3) Legal ramifications

The legal landscape of using social media data in credit scoring is murky. The potential for litigation around privacy invasion, data breaches, and discrimination is a genuine concern that cannot be overlooked.

Tips for mindful social media behavior

Here are some mindful social media tips to consider

Think twice; post once

Every post, like, and share paints a picture of your lifestyle. Is it lavish, or do you seem to live within your means, promoting a good credit score? Before you post about that extravagant vacation or a luxury shopping spree, remember that it could potentially create an impression of financial irresponsibility. Make sure your online persona reflects fiscal prudence.

Prompt responses

Your interaction levels, especially response times, could be analyzed for reliability. Are you quick to respond, or do you let messages pile up? Prompt responses can suggest responsibility and attentiveness—qualities lenders appreciate.

Be conscious of your connections

It’s not just about who you know—it’s also about who you’re connected to online. Do your friends have healthy financial habits? Lenders may view your network as a reflection of your behavior. Cultivate a digital network of responsible and positive individuals.

Be consistent

Maintain consistency between the details provided to financial institutions and those shared online. If your listed job location varies from your frequent check-ins, it might raise eyebrows.

Don’t flaunt debts

Refrain from sharing details about your debts or financial struggles on social media. While it’s essential to have honest conversations about money, openly discussing debts might signal financial instability to potential lenders.

Post on social media with caution – and protect your credit score

Once thought to be a brief aspect of our digital lives, social media behavior is becoming an influential player in the financial field, potentially shaping credit scores and redefining financial trustworthiness.

Remember, every post, every interaction, is a stitch in the fabric of your digital identity. Make sure it’s a tapestry you’re proud of that accurately showcases your fiscal prudence. It’s time to transform how we perceive our online lives, understanding the indelible mark we leave behind with each click.

As we enter a future where our social media behavior increasingly intertwines with our financial reputations, the mantra is simple: Be authentic, responsible, and mindful. Because in this digital age, someone’s always watching. And sometimes, it’s your credit score.