The next time you approve a friend request on Facebook, it could determine whether your future loan applications are accepted or rejected.
Facebook wants to take the old proverb “birds of a feather flock together” and use it to crowdsource your credit score.
The world’s most powerful social network received a new patent to do just that.
Facebook’s new patented technology would allow financial institutions to review the credit scores of friends in your social network and factor them into your loan approvals.
If the average credit score of your Facebook friends didn’t meet the minimum score requirement, you could be denied loans.
From Facebook’s patent:
In a fourth embodiment of the invention, the service provider is a lender. When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual through authorized nodes. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.
The credit aspect of the new patented technology is part of a broader description that includes improved search results as well as improved filters to fight spam and offensive content on Facebook.
This patent is reportedly one in a group of patents that Facebook bought from Friendster in 2010 for $40 million.
Talking heads in the tech industry are now speculating that Facebook’s new patent could lead to the development of a standardized social media credit score for people.
Facebook has been silent on when, how and if they plan on getting into the credit rating business, ignoring numerous media inquiries into the matter.
Facebook is also not the first tech company to come up with the social media credit scoring idea.
In April, we posted a related article Using Social Media To Measure People’s Insurance Risk.
In addition, a number of companies in Hong Kong and China are already using social media connections as a measure of credit risk for people who live in emerging economies and have little or no credit history.
Current credit rating systems that use social media to score credit risk typically factor hundreds of data points gathered from social networks, messaging apps and even online gaming sites.
It is important to note that these alternative credit rating systems are opt-in. People must agree to allow their credit history to be accessed before being included in the system.
Some consumer advocates in the United States do not think this new system will work. Some suggest that Facebook and other social media sites are just trying to find new ways to profit from the large amounts of personal data that they have collected on people.
It remains to be seen whether or not this new social take on credit scoring will threaten the business of the major credit bureaus like Equifax, Experian, and TransUnion.
However, these credit scoring companies tend to focus on people who have established credit histories.
There are currently around 50 million people in the United States with blank credit histories that can’t be scored by traditional methods, but the real potential for this system seems to be in countries that have developing and emerging markets.
A rating system like Facebook’s could give people access to credit resources that would have been previously unavailable to them.
It is also possible that the technology described in the patent application will never be used to evaluate credit scores at all.
If Facebook is seriously considering using social credit scores on people, it would be difficult to get approval for it in the United States due to a wide range of credit reporting, lending and consumer information laws that govern the industry.
However, even if this new credit rating system is never used, it shows just how far Facebook is willing to go to involve themselves in every aspect of peoples’ lives.
For all of you social butterflies on Facebook, someday you may want the option of doing a credit check on people before you approve any more friend requests.