Could Being Racist Make It Harder to Get a Loan?

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All sorts of stuff factors into your credit score: How many credit cards you have; whether or not you’ve paid bills late in the past; the age of your oldest account; what types of loans you have; whether you’ve maxed out your credit cards; and so on.

But a handful of high-tech startups now see an opportunity to sift through mountains of other data about you, including some drawn from your social media profiles, to determine whether or not you’re the type of person who’s going to pay back a lender or not. And you’d be surprised what kind of information can have an effect. Are you the kind of person who “shouts” in all caps or never bothers to capitalize at all? How many friends or connections do you have? And even: Are you the type to fire off negative or racist commentary? 

Wait — being racist could cost you a loan? What does prejudice have to do with whether or not you’ll pay back a debt?

“On a public forum like Facebook, it’s like talking in public,” says Navin Bathija, founder and CEO of Neo, a company that evaluates car-loan applicants (with their permission) based not only on traditional lending metrics but on the strength of prospective borrowers’ professional networks on LinkedIn.

Bathija says there’s a strong correlation between a robust network and the likelihood of repayment. A person with a bigger network and more recommendations, along with a track record of steady employment and advancement without job-hopping means the borrower probably has the means to pay back the loan; and more connections mean they’ll be in a better position to land a new job if they do get laid off.

(MORE: Uh-Oh: Banks and Credit Unions Peddling Payday Loans)

The link to racism is something the team at Neo is still testing. “Mr Bathija reckons that within a year there will be enough evidence to determine if making racist comments on Facebook is correlated with a lack of creditworthiness,” The Economist says.  The theory goes like this: People who express racists beliefs online probably vocalize them in the real world, as well. In the workplace, this could lead to conflicts with co-workers, clashes with suppliers or customers, and even legal trouble.

The link between social attitudes and job stability isn’t as far-fetched as it might sound, says Heidi Golledge, CEO and co-founder of CareerBliss.com. “We can correlate almost exactly productivity, their success at work, to positivity on social media pages,” she says. People who gripe about their lives — even if they don’t complain about their jobs — and vent about religion, politics, or race don’t do as well on the job. “With creditworthiness, it’s the same thing,” Golledge says. People who exercise the self-discipline and control to keep it dignified on their social media profiles are exhibiting the same qualities lenders look for.

Neo isn’t the only such company dipping its toes into big-data waters. A startup called LendUp is experimenting with the idea that people with stronger social networks, as exhibited by having more friends and more frequent interactions with them, are more dependable borrowers. “If you have a very strong, close geographic network, that’s helpful to you,” CEO Sasha Orloff told TIME last year.

(MORE: Can a Payday Lending Start-Up Use Facebook to Create a Modern Community Bank?)

ZestFinance is a lending site that uses a mashup of “Google-style machine learning” and “Capital One-style credit scoring,” according to its website, to yield default rates 40% lower than comparable services that target underbanked Americans. The company’s founder and CEO Douglas Merrill, former CIO at Google, tells The Economist that people who either ignore or abuse the caps-lock key are less likely to pay back their debts, when other factors are the same.

The biggest argument for slicing and dicing these seemingly unrelated snippets of online activity is that people with sparse credit histories — often young people or recent immigrants — would no longer be penalized by a lending system that takes a “guilty until proven innocent” approach. Currently, you pretty much have to earn the right to get a good rate on a loan, which means plenty of people who will turn out to be diligent borrowers wind up paying inflated rates until they prove themselves by establishing a standard credit history.

For lenders, the other advantage is that social media could give them a crystal ball to predict which borrowers look good on paper but will turn out to be duds.

Bathija points out that there’s a right way and a wrong way to go about this. Certain behavioral patterns could wind up being proxies for factors lenders aren’t allowed to discriminate against, like race.

Although social media experts frequently warn consumers against letting it all hang out online, many of us ignore that advice. At its worst, the idea of mining our online selves for slivers of data could seem reminiscent of the Miranda warning recited to criminals: Anything you say can and will be used against you.

“It’s scary to some extent,” Bathija says, “But this conversation needs to happen with consumers because, whether they know it or not, [social media] information is being used.”

14 comments
BasilJenny
BasilJenny

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braba66
braba66

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RalphKawuzi
RalphKawuzi

If that's the case, then their marketing person Mike Armstrong should be the last one receiving a loan -- I know him from his time at Capital One, and he is the biggest racist and xenophobe I've ever encountered.  No wonder, he grew up in the polished ring-wing nutty Richmond VA burbs...

GerardMcintosh
GerardMcintosh

I don't think the powers that be are serious about taking a black mans technology serious..its just the way this country is

JonHainsworth
JonHainsworth

Being racist makes it harder to get a loan?  No way - this assume banks have some level or morality.  Just recently HSBC was found guilty of laundering money for drug cartels.  Now we are to assume these same institutions care about racism?

They just want to make money.  If they think you can pay it back - your approved.  Thats it.

gtechl33
gtechl33

Of course, the more pertinent question is how the determination of "racist" is made. During the Obama campaign it has been intimated that a negative vote for Obama was an act of racism. However, to Obama policy opponents that judgment was itself the purest expression of racism. So, what it really happening isn't a discernment of racism. It is an expression of the bias of the information analyst depending on their own bias and sadly, their own racism.

sixtymile
sixtymile

This is pretty suspect stuff. Someone is going review social media posts and assess the personality characteristics of the poster and convert that into a credit score. And the accuracy of this assessment is going to be verifiable how? It's pretty-well known that emails and online postings, especially when irony or sarcasm is expressed, are very often misunderstood.

olegtarkovsky
olegtarkovsky

Communist Jews Should be held Accountable for the Ukrainian Genocide(Holodomor). Jew Banksters are responsible for WW1, WW2, Middle East Conflict, 9-11, and the bankrupting of the USA.

TomNogaro
TomNogaro

sounds like the beginning of herr adolf's world excluding jews from financial transactions: grumpy old white men need not apply. oh well, lipstick put on a pig, and it's still a pig. wait! should i have capitalized "pig"? (also, kindly disregard any show of emotion in the "!" which was an unfortunate emotional outburst; sorry, am i forgiven, buddy?)

now, do i get my loan, or must i befriend every non-white i can find on facebook, mr. bagavadghita? how bout all of africa? (dear sir, pardon my sarcasm; btw, i gather ceo's are not sarcastic, right, or do you just study little people? now that would seem to be inappropriately elitist, wouldn't it?) 

finally, did you know that blacks as a minority definitionally cannot be racist, so would you consider your unidirectional studies and practices anti-white, and therefore reverse racist? as bugs bunny would say, complicated world we're in, ain't it, doc? lol.

(please deem all appropriate caps appropriately typed, ok? my ivy degree fails my grammatical skills right now.)

antonmarq
antonmarq

Absolutely not; especially, if you're white. 

DeweySayenoff
DeweySayenoff

@gtechl33 If your example was one of racism in the first place, you may have had a point.  But it wasn't.  A vote is a vote, regardless of the race of the individual.  Not supporting a candidate is a perfectly legitimate act in the country, even if someone does it based on race.  But someone who does base it on race, either way, IS racist.

So to say online in a social media forum that someone is voting for or against someone BECAUSE they are a certain race, that IS racist.  The decision is based on one's views and when race is the over-riding factor - in supporting the candidate or not - then the individual making that distinction is, indeed racist.

The ONLY people who ever intimated that voting against Obama was racist WERE THEMSELVES RACISTS, and all of them were right-wing or black. The GOP is very good at taking what sounds like leftist rhetoric and twisting it around to suit their own sense of reality.  This happened because there were a HELL of a lot of Americans who said they'd never vote for a black man (Although Obama is half black, half white, whatever "muddies up the whitie" is what they are called) who were subsequently labeled as racist because they based their vote on race alone.  When they were, rightly, pointed out to be racists, they turned around and said "So voting against Obama is racist?"  And that message kept being repeated.  The fact is voting against Obama is NOT racist, in and of itself.  It's voting against him (or for him) JUST BECAUSE OF HIS RACE.

Of course, if people kept their damn mouths shut on social media and didn't make fools of themselves by saying they'll never vote for a black man, or would vote for someone because they were black, the impact of this experiment into credit-worthiness based on social media wouldn't be a story in the first place.They can certainly find other reasons to like or dislike a candidate besides the color of their skin.  And having strong political feelings needn't be a detrimental thing provided they don't start talking about supporting secession or civil war or other acts of sedition, treason or terrorism.

mexoplex
mexoplex

@antonmarq boy did you nail THAT on the head. And you didnt write a whole speech to do it.

gtechl33
gtechl33

@DeweySayenoff @gtechl33  Great post, Dewey. My disagreements in the political world are always policy based, not race based. As a person who has been persecuted by racists in the past and present, black, white, hispanic...fill in the blank...because I didn't robo-follow a political ideology...it is insulting at best to be called racist purely based on my yay or nay vote for a particular candidate.  I loved my first black family at age 5 before anyone could teach me (a white kid in the South!) that I should hate instead of love based on skin color. I don't fit nicely into 'the norm' as far as political parties go, voting my point of view rather than a party line. I hope we can make progress in the broad spectrum as far as race card usage is concerned from all parties involved. Thanks for the  thoughtful reply.