Are postings on Facebook and other social media off limits in determining your creditworthiness?
FICO, creator of the widely used credit-scoring systems in consumer lending, insists social media are not being screened despite multiple reports in the media recently that seemed to indicate otherwise.
FICO has recently added new layers of information that help determine who is creditworthy and who is not. The new data, which are part of a pilot program, reflect such things as how well some consumers pay their cable TV bills, smartphone bills and utility bills.
According to FICO, this trove of information is aimed at millions of people who have had difficulties getting access to credit or who are new users of credit, such as college students and other young consumers.
While FICO is looking at alternative data, it said in a statement to me this week that “at this point social media data is not part of any FICO score.”
The confusion over the use of social media appears to have started when FICO’s chief executive, Will Lansing, was interviewed last month by the Financial Times.
In that conversation, Lansing said this: “If you look at how many times a person says ‘wasted’ in their (Facebook) profile, it has some value in predicting whether they’re going to repay their debt. It’s not much but it’s more than zero.”
FICO said the comment and accompanying story headlines that focused on how “being wasted” may damage your credit score “created a misperception” about the company’s credit-scoring policies.
Christina Goethe, FICO’s director of communications, said Lansing was “talking generally about the fact that different types of data have different levels of predictive value” in terms of being a credit risk or not.
Goethe said there were several important reasons why the company is treading carefully with social media data.
FICO scoring systems have been redeveloped numerous times over the years to keep up with the behavioral trends of consumers, Goethe said, “but changes to the score are made cautiously after exhaustive research.”
Unless social media information is “proven unequivocally to be predictive of credit risk, it will not be part of any FICO score,” she said.
Goethe also said if social media posts were collected and used to generate a credit score that influenced whether a person got a car loan or a credit card, then the decision would have to comply with all fair credit reporting laws and regulations.
“This includes enabling consumers to dispute the data used to calculate their FICO scores,” she said.
The dispute resolution process, she said, would be very difficult and need to be refined.
Meantime, FICO and its credit card test partners are focusing on whether some consumers pay their cable bill and other forms of alternative data to crunch credit scores. A full roll-out of this system, called FICO XD, could come early in 2016.