University of Georgia law prof Lindsay Sain Jones and Virginia Tech law prof Janine Hiller offer what should be startling news:

What does your SAT score mean for your ability to pay off a car loan?

What does your Facebook feed say about your chances of landing a mortgage?

And, what does your propensity for snacking on road trips mean for your credit score?

The answers: More than you think.

Traditional credit scoring is based on a person’s demonstrated ability to take on debt and pay it off. But with the dawn of larger data pools and access to more sophisticated modeling programs, lenders and credit agencies are taking more nonfinancial factors into rating creditworthiness, particularly those without an extensive credit history. This group tends to include vulnerable populations who are often more susceptible to predatory lending practices.

University of Georgia, “How social media posts could affect credit scores” at EurekAlert! (May 17, 2022) The paper is open access.

Their Abstract (and open-access paper) are admirably easy to read and spell the problem out. The time of day you apply for a loan might matter now — as just one example:

Abstract: Access to credit in the United States is contingent upon an individual obtaining the “right” credit score. Yet the opaque scoring system makes it nearly impossible for an individual to break out of a cycle of low credit ratings and participate in the benefits of the American economy. Partially as a response, alternative credit rating products now use personal nonfinancial data for automated credit decision-making, purportedly intended to expand access to credit. Social media activity, college grades, and even what time of day a person applies for a loan are examples of data points used for this purpose. However, these and other alternative data can be highly correlated with protected traits, such as race and national origin. While extending access to credit equitably across society is an important goal, the cure should not exacerbate the same inequalities that it is designed to address. The necessity of credit for the modern consumer compels continued oversight of the credit infrastructure to ensure fair data practices and to hold participants accountable. This article contends that consumer access to a fair credit score is a necessity, and that the consumer credit infrastructure should be viewed as a modern utility and subject to additional oversight. A proposal is then advanced that establishes fair data duties for credit scoring entities.

One problem is that people don’t know what they are being scored on by these new systems (the black box problem). That is, if you knew that it mattered, you might have chosen 9:00 am rather than 9:00 pm to make your application…

The argument for the new systems is that they may help “underserved populations” (people who had trouble getting credit in the past). But how can it help if prospective borrowers don’t know the “lifestyle” basis of their credit scores? And it could be worse. When there isn’t a lot of data:

Other times lenders scrape information from public records or social media accounts to build a credit profile without borrowers’ knowledge.

“There’s also fringe alternative data that companies gather without your permission,” said Jones. “There are companies that specialize in pulling data from online sources — your LinkedIn and Facebook profiles — and feed into their credit model.”

This can include purchase history, where and when a person applied for a loan, student history, employment history and social media information.

University of Georgia, “How social media posts could affect credit scores” at EurekAlert! (May 17, 2022) The paper is open access.

So if you had a spat with someone on social media, that could affect your chances of a car loan. You don’t know — and there is no way to contest it:

“There’s no appeals process,” [Jones] said. “With your traditional credit score, you can appeal inaccurate information. Say you had a credit card with Bank of America, and your report says that you had a charge off. If you didn’t, there’s a process for appealing that error set up by the Fair Credit Reporting Act. They have to address your concerns.”

There’s no way to appeal if the lender doesn’t like how often you travel or buy clothes, she said.

University of Georgia, “How social media posts could affect credit scores” at EurekAlert! (May 17, 2022) The paper is open access.

The researchers think that Congress should institute new regulations to bring more fairness to alternative credit reporting systems. The alternative is, presumably, government by Instagram or Twitter.

You may also wish to read: Trudeau’s truckers reveal problems with banking infrastructure. And crypto isn’t the solution you might think it is. Even when not coerced by government actors, banks have been getting politically active in choosing whom to do business with. (Jonathan Bartlett)