
Facebook friends could change your credit score - mrt0mat0
http://money.cnn.com/2013/08/26/technology/social/facebook-credit-score/index.html?hpt=hp_t2
======
ignostic
This is the first I'm hearing of it, but assessing credit risk based on social
profiles is almost definitely illegal. Conclusions based on friends or
location rather than actual history will have a disparate impact on
minorities.

[http://en.wikipedia.org/wiki/Disparate_impact](http://en.wikipedia.org/wiki/Disparate_impact)

~~~
kybernetyk
> This is the first I'm hearing of it

Here in Germany it's pretty common.

I'm living in an apartment building where it is impossible to get a credit
card. It's not only me - all neighbors I asked have the same problem.

Looks like one of our neighbors has a catastrophic credit rating and is
pulling down the rest of us.

I heard similar stories from friends who were able to get a loan only after
moving.

~~~
simoncion
That is insane. How is that rationalized by the credit card companies?

~~~
kybernetyk
I guess statistically ;)

They take average paying morale in a neighborhood into account. But I guess
one very bad seed can spoil pull down a otherwise good/average neighborhood.

~~~
bougiefever
All the more reason to open a private mailbox and conceal your real address
from banks, employers, and when making purchases. Also, since I live outside
of the city, shipping is cheaper too. I doubt the UPS store has a bad credit
rating.

~~~
wyclif
For many consumers, their bank already knows their physical address since they
have their home loan through the same bank.

~~~
bougiefever
The original post sounded like they were renting, so yea, your mortgage holder
knows the address of the house you bought, but your bank does not need to know
the address where you are renting. A personal mailbox is not going to shield
your private address from every entity, but it can help with many. Also, the
mortgage holder does not know if you are still living in that house,
especially if you list a different address.

------
rayiner
_This_ is what I'm worried about way more than NSA spying: the potential for
companies using Facebook data and data in your GMail, and the like, to screw
you. This is where the real money is. I've had several friends who had trouble
with background checks for jobs because they had collections on their credit
score and the like. The ridiculousness of it: people hindered from improving
their financial situation because of their past financial situation.

~~~
kintamanimatt
Why not be worried about both? Don't confuse palpability with severity!

------
aestra
> Kreditech can determines your location and considers creditworthiness based
> upon whether your computer is located where you said you live or work.

Um... How does it determine your location? Your IP address? Cause that's
really a good indication of where your computer is physically located. Hint,
our work traffic is routed through company headquarters halfway across the
world before reaching Kreditech's website. Now Kreditech thinks I am lying
about where I am located. Great.

~~~
kintamanimatt
As do some twitchy credit card fraud filters!

------
cmdkeen
This is more to do with people who don't have traditional indicators for
credit scores, rather than throwing away everything else.

The Economist covered it a while back in developing nations - if your credit
score suffers because of a friend you can exert social pressure on them to pay
back the loan. You don't want to be known as a deadbeat to your friends so you
are less likely to take out a loan you can't afford.

Though in that example the social network is an explicit opt-in I believe.

~~~
001sky
There is most likely an informal 'friends of friends' effect for the wealthy
and priviledged in any event. Take a look at, for example, the VC market and
its extensive reliance on private, pre-existing relationships. While equity is
not credit, the techniques of investment selecetion (both deal generation and
screening) are at a macro level shared elements. Now, the more concerning
issue is when poor people are flagged as at risk because they are poor. Sort
of the reverse of the well connected wealthy people getting a helping hand.

------
fluidcruft
Cool, cool. Cool, cool, cool. So now who gets to build a facebook-based credit
score optimization app. Buy and sell your friends so you can buy a house/get a
job.

~~~
mrt0mat0
this could have the potential to break the concept of facebook (though it has
managed to do much of the damage on its own) in that it makes you unfriend
people so you don't have a negative mark, and add friends you don't like or
socialize with, and force you to talk to them, just to help your chances at a
loan... seems like the only facebooks true purpose will be lost

~~~
icebraining
Nah, you just need a second FB account just for these purposes.

------
ScottWhigham
If ever there was a time for the HN mods to change a title, I would think this
sort of article would be a good choice. That said, even the original article
title ("Facebook friends could change your credit score") is just flat out
wrong. Your "credit score" \- as in your FICO score, for example, has nothing
to do with Facebook/Twitter/etc. The article is a good expose on what other
data that companies are using in addition to your credit score. The title is
just for link-bait reasons, nothing else.

~~~
corin_
I'd say this is an example of a title that, while technically wrong, is
ethically fine - well, maybe not quite, as it's wrong, but it's wrong for the
right reasons.

I doubt anyone cares about their credit score for the sake of the official
number of their credit score, people care about it because of what it means
when you want to buy a house, or take out a loan, or sign a mobile phone
contract. If Facebook friends affect these things negatively (or positively),
then I don't care whether it's because they change my credit score, or because
everyone looks at these things as well as my credit score, either way it has
the exact same effect.

~~~
drivingmenuts
Car and house purchases use a slightly different metric to determine your
creditworthiness, acc. to the dealership where I got my car. Essentially, cars
and houses are material objects that can be repo'd far more easily if you
don't make your payments.

Personally, I'd be happiest if I had a credit score of zero or whatever the
number indicating non-existence is these days.

------
dreamdu5t
So? Why shouldn't someone be able to use public information to publish their
own ratings of your credit worthiness?

Nobody has to trust the popular credit rating agencies, and people are free to
make their own ratings/certifications or start their own companies that do so
(unless the government prevents that... which if so, is a problem with
government not the rating agencies.)

~~~
nitrogen
Nobody _really_ wanted their entire social network to be public; Facebook kind
of removed the option. Even those who think they have nothing to hide don't
want this.

------
mcgwiz
All sensationalism, little substance. Particularly regarding the topic of the
link-baity title.

> "One such company, Lenddo, determines if you're friends on Facebook (FB)
> with someone who was late paying back a loan to Lenddo....

No explanation of the what the mechanism for collecting this is. Likely it's a
matter of opting in to share your data through a Facebook app, an act whose
culpability lies with the consumer.

> "Lenddo has about 250,000 members, but it only operates in the Philippines,
> Columbia and Mexico."

Um. Ok. Three sem-developed nations. It's journalistically incompetent not to
explain what the relevance of those nations are to the operation of Lenddo,
and why any of that is relevant to the American general public.

The only thing I learned from this was that CNN Money articles can be
remarkably content-farmy and AOL-like, and HN readers can subdue their
analytical spirit when it comes to piling on the criticism of an already-hated
company (e.g. Facebook).

------
peterkelly
The only thing mentioned in the article that I agree with them using is
penalising people who submit applications in all caps.

------
readme
Title is linkbait. This has nothing to do with your FICO score (what credit
score tends to imply here in the US). Only some small startup lenders are
doing this.

What a relief, since I deleted most of my facebook friends and left only two
people on it. Although, from what I'm seeing, that could be a plus for some of
these lenders!

------
mathattack
What's interesting here is that they would Facebook rather than LinkedIn.
Perhaps the LinkedIn network will suggest "Can you afford to pay?" while
Facebook is "Are you inclined to?" Or perhaps they're targeting low income
folks who aren't on LinkedIn?

------
saosebastiao
I'm wondering how many of the factors are based on things that can be
identified from photos. You can probably get some very strong (and useful to
lenders) criteria from photos, and yet be treading very dangerous water with
regards to discrimination.

------
bougiefever
I think it's awesome they are knocking down applications IN ALL CAPS. Finally
someone is punishing internet shouters in their pocketbooks.

------
Houshalter
People will likely freak out about this but I don't see anything wrong with
it. Making more accurate predictions is a good thing. Why does it matter what
the data used was?

Unfortunately I expect this to become another "illegal datapoint" that is
illegal to take into account. People hate the idea of being judged for
seemingly arbitrary things. Which makes sense. But if it actually does
correlate with the truth, if it actually makes predictions more accurate on
average, why shouldn't it be used?

~~~
kintamanimatt
Here's why: "Hi, I can't be friends with you on Facebook/Twitter/Google+
because although you've been a really great friend to me, you lost your job
last year and it's had a bit of a dent on your credit history." \-- or --
"Hey, I don't want to add you to Facebook because I don't know how well you
pay your bills."

(This isn't a real issue for me because, like the nouveau cool, I deleted my
Facebook.)

Yes, you could argue the person doing the digital ostracizing is a craptastic
piece of shit, but the criteria for friendship shouldn't be creditworthiness.
If I had to eliminate otherwise good friends (or funny acquaintances) because
I know they've had problems paying their bills, I'd not be a happy bunny. It's
trite to highlight this, but credit scores impact all kinds of things, from
interest rates, availability of financial products, ease of getting a merchant
account, and apparently, how easy it is to get certain jobs.

Where does it end? Phone records? Emails? Chat logs? Who you Tweet with most?
CCTV hooked up to facial recognition software to figure out who you're going
to lunch with?

There's nothing good about this and I hope their business fails.

~~~
Houshalter
You are right, it could create bad incentives. If that is the case then I will
agree with you, but many of the people are arguing that it is _inherently
unjust_ to use certain things to make predictions, which makes no sense at
all.

I don't think in practice many people will change their friends over this, and
this is only one piece of information being used, so it probably wouldn't have
a huge effect if they did so.

~~~
kintamanimatt
> many of the people are arguing that it is inherently unjust to use certain
> things to make predictions, which makes no sense at all

Would it be wrong to judge my creditworthiness by the fact I'm white and gay
if you could find some correlation between those traits and bill paying
habits? What if white gays were typically irresponsible with money† (because
omg shoes) and as a consequence my credit score is forever (or at least
initially) tarnished because I'm a white homo, irrespective of my bill-paying
ability. I can see many ethical issues with this.

> I don't think in practice many people will change their friends over this,
> and this is only one piece of information being used, so it probably
> wouldn't have a huge effect if they did so.

LOL. People will do a lot in the name of money. If Ms. Sally wants a mortgage,
like really, really, really bad, Ms. Sally is gonna drop her deadbeat Facebook
friends and game the fuck out the system. If she's successful, not only is she
more likely to be approved for that mortgage, but she'll get a better rate. I
think it's naive to believe that any other behavior is being encouraged by
this kind of predictive credit scoring.

When people figure out how to game a system, they tend to do so. Such signals
would quickly be rendered useless, unless you could effectively figure out who
is gaming the system, and how hard.

†I'm not advocating this idea.

~~~
Houshalter
>Would it be wrong to judge my creditworthiness by the fact I'm white and gay
if you could find some correlation between those traits and bill paying
habits? What if white gays were typically irresponsible with money† (because
omg shoes) and as a consequence my credit score is forever (or at least
initially) tarnished because I'm a white homo, irrespective of my bill-paying
ability. I can see many ethical issues with this.

Yes it seems wrong, but why does it matter what the data is if it's being used
to make more accurate predictions? That's the goal. The data being used makes
no difference. We aren't talking about humans which are irrational and go "omg
I hate gay people and want to make them worse off by refusing to do business
with them", this is an unbiased computer algorithm looking to predict how
likely you are to pay back your loan. If you really are less likely to pay
back your loan than so be it. It can just as easily go the other way and judge
in your favor. On average you should expect to benefit from such a policy, not
lose from it.

>LOL. People will do a lot in the name of money. If Ms. Sally wants a
mortgage, like really, really, really bad, Ms. Sally is gonna drop her
deadbeat Facebook friends and game the fuck out the system. If she's
successful, not only is she more likely to be approved for that mortgage, but
she'll get a better rate. I think it's naive to believe that any other
behavior is being encouraged by this kind of predictive credit scoring.

It will probably be difficult to game the system (just deleting friends
doesn't remove your info and might be a red flag that you are trying to do
that.) The benefits are probably small (they are using all sorts of other data
on top of it to make predictions about you.) And people don't know what the
algorithms are or even what information they are using, which makes it harder
to figure out how to game it.

But even if they do so, so what? That's their choice. The models will be
readjusted to fit the new data, and the predictions will still be accurate.

~~~
kintamanimatt
Judging my creditworthiness based on the creditworthiness of my peers is akin
to arresting me if half my friends had been arrested, or giving me a speeding
ticket if a third of my friends had received one in the past year. It _might_
indicate I'm more likely to be arrested or drive too fast, but I shouldn't be
punished (or rewarded!) because of what other people do. What if 20% of my
friends had abused prescription painkillers and I'd just had surgery. Should I
be denied a prescription for painkillers because my social circle had a higher
than average incidence of drug misuse?

Put yourself in the situation that you're punished because of your friends'
actions, or the actions of people with the same gender, race, or sexual
orientation. You'd feel it's unfair (if you're rational) because it is unfair!

~~~
Houshalter
In your example that would be preemptive imprisonment if there was a greater
than some probability you were a criminal. I don't like the idea of preemptive
imprisonment, but if that was the case, then I don't see how adding more data
to make the predictions more accurate would be a bad thing.

Same thing with the second example. If there was a 99% chance of you becoming
addicted to them, then you probably shouldn't be given pain killers. It would
be for your own benefit by avoiding addiction. That's not a punishment, that's
a good thing.

>Put yourself in the situation that you're punished because of your friends'
actions, or the actions of people with the same gender, race, or sexual
orientation. You'd feel it's unfair (if you're rational) because it is unfair!

This is the reasoning why people object to it. Humans have evolved a sense of
fairness and unjustness that we react to, and usually it's a good thing that
keeps society functioning. However it's an emotional response. There is no
rational reason that the world would be better if we just gave loans to
everyone at the same interest rate, or if we intentionally excluded useful
data points from determining the risk of things.

~~~
kintamanimatt
> In your example that would be preemptive imprisonment if there was a greater
> than some probability you were a criminal. I don't like the idea of
> preemptive imprisonment, but if that was the case, then I don't see how
> adding more data to make the predictions more accurate would be a bad thing.

That position is utterly untenable. It's so obviously wrong to imprison
someone because some signals indicate they might commit a crime based on who
they're friends with on Facebook! There's a difference between being buddies
with a gaggle of career criminals and actually committing (or conspiring to
commit) a crime!

> If there was a 99% chance of you becoming addicted to them, then you
> probably shouldn't be given pain killers.

If that person has a history of abusing painkillers, yes. If their friends do?
C'mon, you can't possibly justify that position.

> There is no rational reason that the world would be better if we just gave
> loans to everyone at the same interest rate

I didn't argue for equal interest rates for all. It makes sense for interest
rates are tied to risk, but it's only reasonable to make an assessment of risk
based on an individual's performance and ability to pay, not their friends' or
peers' performance.

> or if we intentionally excluded useful data points from determining the risk
> of things.

I'm not sure whether you've thought this through. Let's say, for example, it's
determined by someone's payment history that they're not good at managing
their money. They learn from their mistakes, improve their payment behavior,
and subsequently lower their risk of default. On the other hand, what if it
was determined that Asians are more likely to default on their debt. What can
you do to stop being Asian? What if gay people were less likely to default on
their debt and then irresponsible people who happen to be gay find it easier
to get debt? Your thesis breaks down very quickly and I truly struggle to
believe you agree with the position you're making.

Neither one of us are making novel arguments now, but thanks for the
interesting perspective and debate!

~~~
Houshalter
>That position is utterly untenable. It's so obviously wrong to imprison
someone because some signals indicate they might commit a crime based on who
they're friends with on Facebook! There's a difference between being buddies
with a gaggle of career criminals and actually committing (or conspiring to
commit) a crime!

I think you are trying to create a straw-man here. Imprisoning people even
though they haven't committed a crime is _obviously bad_ , and I completely
agree with that. All I'm saying is if we were going to do it, then we might as
well try to make the predictions as accurate as possible. If your predictions
are more accurate fewer "innocent" people will end up in prison (innocent as
in, wouldn't commit a crime if left out of prison.) In your example, less
accurate predictions can literally ruin people's lives. Excluding data in that
case would be much worse than just for loans.

>> If there was a 99% chance of you becoming addicted to them, then you
probably shouldn't be given pain killers.

>If that person has a history of abusing painkillers, yes. If their friends
do? C'mon, you can't possibly justify that position.

I don't see why it matters that the data came from who your friends were. It
could just as easily come from blood tests or who your parents are, or all
sorts of arbitrary things outside of your control. The point is 99% of people
with that feature become addicted to the painkillers and it ruined their
lives.

If there is a 99% chance of that happening to you, would you take the pain
killers? Would you really care where the data came from Would you really
ignore information if it was your own life at stake?

>I didn't argue for equal interest rates for all. It makes sense for interest
rates are tied to risk, but it's only reasonable to make an assessment of risk
based on an individual's performance and ability to pay, not their friends' or
peers' performance.

But assessing risk _at all_ puts some people at a disadvantage. It doesn't
matter where the data came from, if the predictions aren't 100% accurate then
some percent of people are going to wrongly have a higher interest rate, even
if they pay back their loan on time.

I think you are thinking of this as an incentive system and not a predicting
system. That is it's ok to select for features that people can control, like
their past history, but not for things that are outside their control. But the
point of interest isn't to reward or punish people for paying or not paying
their previous loans back on time. It's just to make up for people that don't
pay. The riskier you are, the more it costs to make up for all the other high
risk people that didn't pay.

Ideally you just wouldn't give out loans to people who wouldn't pay them back,
and would give loans with no interest to people who would. But usually it
falls somewhere in between 0 and 100% probability. The goal isn't to reward or
punish people, it's to predict as accurately as possible.

------
coin
How do the credit scoring agencies link one's identity to their Facebook
profile?

~~~
mcintyre1994
They don't - the startup considers it in addition to the credit score in
making their decision. That said, I don't imagine you need a great deal of
data to identify most people's Facebook account, not aware of any research
into that though.

------
mrt0mat0
When I finally get a handle on my credit score, they have to come in and make
my facebook profile another factor.... Next it will be my sleeping patterns,
because some article somewhere said that sleeping patterns determine your
likeliness of paying your bills on time.

~~~
MichaelApproved
And driving patterns and browsing patterns and places you frequent and type of
drinks you consume and job history and exercise frequency and weight and what
you watch on TV and stool sample and reddit karma and sperm count and number
of icons on your desktop.

~~~
nathan_long
If only it were bilateral.

"Dear insurance companies, I'm shopping for a policy. Please fill out this bid
form so I can verify your business history, tax compliance, carbon footprint,
employee demographics, political contributions..."

------
nijiko
Wow. Just... wow. Speechless, another reason not to use Facebook.

~~~
21echoes
not having a FB account or refusing to link it would be just as strong (if not
stronger!) of an indicator to their scoring algorithm

~~~
nijiko
Which that in itself is why it is a flawed algorithm.

------
pjbrunet
"When you run with dogs, you pick up fleas."

