If you’re like most people, you open Instagram or TikTok to escape the real world. But there’s a chance your online behavior could have a very real impact on your finances in the near future. Your posts, likes, and comments may become data evaluated by financial institutions when you apply for an online loan.
Today, Social Media Does Not Play a Part in Your Finances
For now, you don’t have to worry about how your social media apps affect your finances. No financial institution looks at these accounts when reviewing applications for loans online.
Typically, when you apply for small personal loans online, you have to submit basic financial information. Things like your income, pay schedule, and credit score are par for the course.
Financial institutions look at this information to determine if you qualify for their short-term personal loans online. If you meet their standards, you may be approved and move on to the next step towards getting a loan online.
Income and credit information paints a picture of your current financial situation. It helps financial institutions understand whether you can afford to repay what they grant you on time. This is called your creditworthiness.
Today, your social media presence does not factor into your creditworthiness. But that could change in the future.
Alternative Credit Data Widens Access to Loans Online
Not every borrower can pass muster when it comes to traditional assessments of creditworthiness. Unbanked and underbanked individuals may not have the required credit score or income to qualify for an essential, emergency loan.
Unfortunately, these people may still have a significant need to borrow. If their brakes fail and they run out of savings, a short term personal loan can help them get back on the road.
Some financial institutions recognize this problem, and they’re starting to collect alternative data to assess a borrower’s creditworthiness.
Right now, all the major credit bureaus (Experian, Equifax, and TransUnion) have started to explore the following alternative credit data to help evaluate creditworthiness:
- Past borrowing history of Alternative Financial Services (AFS), such as payday loans, cash advances, and installment loans
- Transactional and account-level data from borrowers’ bank accounts
- Rent payment history
- Utility bills
- Buy Now, Pay Later (BNPL) financing history
- Property deeds
- Professional and occupational licenses
- Education levels
Social Media May Be the Next Alternative Credit Data Point
As credit bureaus broaden the criteria for determining creditworthiness, some financial organizations have started to consider online behavior as the next assessment bracket.
One day, your reels or comments on an influencer’s post could play a role in whether you qualify for a loan online. That’s because financial organizations tentatively believe this activity could serve as a character reference.
What kind of posts do you make? Are they relatively positive and encouraging? What about the posts you interact with on Instagram or TikTok? Are they like-minded, or do you engage with fringe political posts? What about your LinkedIn account? Does it show you’re a high earner with your nose to the grindstone?
The answers to these questions may one day factor into your creditworthiness. But for now, no one knows how exactly this will play out, nor how the financial world will standardize this assessment.
Until then, it’s important to focus on what you can do to improve your chances of getting a personal loan in the here and now. Shore up your income and credit score before you apply for your next loan.