Understanding your credit score is simple because it is clear-cut. The range where your credit score falls determines whether a lender will approve or deny you a loan. The same range sometimes also decides how much interest rates you’ll pay.
A lender can use a credit score on its own to determine the eligibility of a loan, but generally other factors come into play to define your creditworthiness including work history and stability, recent payment history, and debt-to-income (DTI) ratio.
For instance, if you’re seeking small business administration (SBA) financing, your business history as well as your credit score rating is as important as the collateral used to secure the loan.
But there are instances where these factors won’t influence a lender’s loan decision. Like in the case of a start-up venture, or an inexperienced business owner who doesn’t possess payment or employment histories. Their credit score rating is often zero or merely blank. There’s nothing to show for it.
In such a situation, a lender may experience difficulty in forming a decision that determines whether to provide you funding or not. This is where a lender may need to pay close attention to other unexpected sources for more relevant information.
Think social media!
If you’re not aware, banks and other small online lenders are snooping at your social media profiles to make an informed loan decision. They are looking at key areas on your profile that will influence their decisions on whether to lend you money or not. So spruce up your profile and make sure it gleams.
If research and data is anything to go by, there is no set rule on how lenders are snooping or harvesting information to make a final loan decision. Lending companies, as well as banks, are not confined to a set rule on how they discern who deserves a loan and who doesn’t. Because let’s face it, people’s online lives are discrete and others are not genuine. There are no reliable metrics to help provide a clear decision.
Despite being an unregulated gray area, it is important for you to clean up any mess you may have on your social media profiles, especially if you’re looking for a small business loan. You don’t want a lender to dismiss your realisticloans application because your social media presence is bland or wanting.
Here’s what to consider:
1. Lenders Assume You Are “Tarred with the Same Brush”
Some years back, Facebook acquired a patent that gave lenders a free will to assess borrower’s creditworthiness based on the credit ratings of those in their social network.
In other words, if a friend has a low credit score and belongs to your social media network, lenders will assume birds of a feather flock together. They will assume you are tarred with the same brush. And there goes your chance of securing a loan.
So Facebook gave lenders a chance to peep on your Facebook friend’s credit scores to help determine your eligibility of a loan. If the average range of your friend’s credit scores rating falls within a minimum of the required score, chances are your loan application process will sail through.
It is, therefore, important to have a good social media friend list especially on Facebook because lenders will take a closer look of your profile to validate a few things including irresponsible spending of money or cases of fraud or suspicious activities.
Anything that will raise a red flag has the power to decide whether you get a loan. Some lenders will also assume your friend’s behavior is the same as yours. After all, great minds think-alike and people tend to surround themselves with people who have similar characteristics or personality. So if you are wont to share your friends wanting posts, there’s a likelihood lender’s assume you have similar in traits.
2. LinkedIn Profile Reflects How Serious Your Career Path Is
You can’t ignore the fact that your LinkedIn profile casts light on your work stability (or lack thereof). Some lenders will take considerable time in analyzing your LinkedIn profile to determine how much you make, your job stability, and work history as well.
Lenders will be viewing your profile as more than just a resume. They will use it to track your job history, how long you’ve stayed on a particular company position. Simply put, they will monitor your career path and any frequent changes you make on a particular industry and for how long.
Your connections, too, will shed a light on how influential you are. While LinkedIn may not be used by the average lender to make a loan decision, it is important to add as many details to your profiles as well as asking for relevant recommendations to appear as credible as possible.
3. Your Brand’s Activity Is Also Important
If you run a business, you also need to consider its social media profile and its online activities including marketing plans. Because if you ever seek startup capital from a lender the chances are, they will peep into your online strategies as well as activities of your business. And this will determine whether your business is credit working. So your brand’s online activities are also equally important.
You can’t overstate the importance of your social media profiles. Lenders are looking at them before evaluating your loan process. Or, making a decision to provide your funding. So it is important that your business’s social media profile, as well as your personal social media profile, casts a good light that indicates potential success and revenue.
All your online activities, in this era of information age, are closely monitored. Make a point hence to ensure your profile presence gleams, and you have a great audience and follower reach.
A business that is doing well online is perceived by lenders as having credible social media reach and engagement. This greatly impacts a loan decision as a lender has confidence your business will thrive even after being funded. A strong social media presence is likely to strengthen even quicken loan approval process. And most likely secure higher amount. So work on building lenders confidence by spoofing apps for social media profiles. Because it is a factor in credit decisions.