Watch Out! Your Facebook or LinkedIn profile might be getting your loans approved or rejected

Getting a loan approved has become a tedious process nowadays as lenders have started adhering to strict rules and regulations. One’s credit score depends on several factors and borrowers must ascertain that they are well within the required range of a good credit score to prove their eligibility for a loan approval.

Borrowers scrutinize an applicant's complete financial and personal profile to decide whether to approve a loan and at what interest rate. Your credit score is a figure that indicates the borrower’s capacity and intention to make repayments, which includes quantification of multiple factors such as history of default, current debt amount, number of loans, etc. basis which lenders determine a borrower's intent to repay the loan amount.

In a nutshell, applicant’s credit score ascertains his ‘creditworthiness', giving lenders a measurement of their credit risk.

Since, credit scores give a clear picture of how likely borrowers are to pay back the debt they owe, it becomes a critical tool of evaluation for lenders. While there are traditional lenders who rely heavily upon factors like repayment history, number of loans, percentage of unsecured credit in total loans and number of delays & delinquencies to determine the credit score, there are also new-age lenders who are mining into borrower’s social media pages to determine their creditworthiness.

So when a borrower applies for a loan, the lender examines credit ratings of friends on that individual's social network. If there are many friends with poor credit histories, lender may reject the loan application immediately without considering the borrower's credit rating, even if it is fine.

When a lender requests access to borrower’s social media account, he analyses variety of factors such as who is the borrower associated with, reputation and nature of his contacts, whether those contacts are reckoned to be ‘positive’, etc. As part of the assessment, lenders also scans the content available on applicant's social media page along with the quality of content uploaded by him/her.

Credit risks & frauds are increasing day by day and there have been several cases of fraudulent loan applications detected by lending companies primarily by accessing their FB/LinkedIn profiles. Therefore, it will be fair to say that social media components are making the credit evaluation process seamless in a big way for lenders.

Indian financial lenders and institutions need to tap the advantages of digital transformation by making their presence felt on social media and start engaging customers. No wonder, Facebook has filed a patent to allow lenders to acquire a direct access to a loan applicant's friends’ list and make their way into his/her credit approval process. Although, the social networking platform has attained exclusive rights to use this specific technology in the U.S., India might be on the list of its countries in the near future.

(The article is authored by Harshvardhan Lunia, co-founder and CEO, Lendingkart)