Your Financially Responsible Facebook Friends Can Help With Your Credit Score

Ever heard of the saying “who you hang out with becomes who you are?” This is also true with the circle of friends that you add into your social media account. Based on a recent study conducted by Yanhao Wei, Pinar Yildirim, Christopher Van den Bulte of University of Pennsylvania and Chris Dellarocas of Boston University, shows and finds that it helps to have financially responsible friends on your social network to get a loan. They don’t even have to co-sign and it increases credit availability to society as a whole.

Take a look at this simple insight: If X person’s friends or family are financially responsible, this also means that X is likely to be the same. In turn, if X knows that his/her credit score will get affected with the people he/she accepts as friends there will be strict screening to the process. Online friendships become more socioeconomically homogenous and social credit scores become even better predictors of true credit risk and improve credit availability.

This will in turn promote and encourage other people to become more financially responsible with the risk of losing friendships if their financial behavior affects the credit prospects of their friends.

The downside to this is that if you are financially responsible, then you would be worried to her credit score if a friend files for bankruptcy. But the authors note that it is possible to weigh person X’s actions more heavily in the credit score relative to those of her friends in the network to minimize the problem.

In conclusion, if appropriately regulated the benefits from 3s  (especially for the poor) should outweigh the potential risks of socioeconomic segregation and discrimination in the credit market.