TIt’s a well-known fact that traditional banks and NBFCs usually consider CIBIL scores the standard measure of a person’s creditworthiness.
However, the reliance of conventional financial institutions on CIBIL ratings to measure the financial capabilities of individuals excludes a large section of the population from their radar. At the same time, the less than transparent methods and reference points used to calculate CIBIL scores make many consumers ‘un-scorable’.
Alternate credit scoring models have emerged as a solution to this since they are more inclusive as compared to the traditional models employed by banks.
Fintech lenders collect non-traditional data from diverse sources, and its volume is usually much larger than that of data from conventional sources. It could combine mobile phone usage patterns, payments and transactions record received on the mobile phone number, the payment history of utility bills and EMIs, among others.
New-age credit scoring methods that use data from a person’s digital activity connected to his/her phone number make it easier for digital lending platforms and marketplaces to access highly detailed and dense data sets.
Moreover, since these platforms have information about a consumer’s mobile phone usage, they can also access their social media usage and network to assess one’s creditworthiness.
With the data from an individual’s profile on various social media networks like Facebook, LinkedIn, and Twitter, among others, digital lenders have the opportunity to create a more accurate credit profile of borrowers and understand their personality.
Information and insights derived from a person’s social networks are used first and foremost to verify the identity of the borrower and ensure whether the personal, professional and financial details provided by them are accurate. They use machine learning and deep learning along with advanced analytics, digital lending platforms assess your credibility as a borrower and repayment ability.
AI and machine learning algorithms are used to check the quality of connections with people who are part of your online social network, which gives financiers better insights as compared to traditional financial data, to help build a credit profile of borrowers.
Along with the profiles of borrowers, lending platforms also analyse the Facebook profiles of their friends to see how stable and responsible they are, based on their work history and credit profiles.
Some lenders also access the patterns of a borrower’s friends to check if any of them have borrowed from the platform and then obtain that person’s payment history to use it as a predictive indicator of the repayment ability of the borrower in question.
Also, platforms like LinkedIn offer a look into the quality of a borrower’s professional network and their job history to verify their employment history along with their identity.
Maintaining social media profile and a strong credit profile
What you post on social media platforms essentially reflects your thought process. Choose your friends in the digital or virtual world as carefully as you would choose friends in real life.
An excellent way to start building a clean profile is to avoid those friends who may have problems with credit or may be financially irresponsible. Also, please make sure to keep your professional online profiles furnished with all essential details and update them regularly.
If you have a good employment history and enough stable connections in your professional network, highlight them enough to build your profile as a credible borrower.
Along with this, make sure to constantly review the history of your social media posts and get rid of posts which may prove to have a negative impact on your overall profile.
Doing all this consistently and regularly before applying for a loan from a digital lending platform will improve your credit profile and increase your desirability and credibility as a borrower among lenders.