Is being 'wasted' on Facebook damaging to your credit score?

In an article about social media and its effect on your credit score, NPR beautifully included the below excerpt from testimony that John Pierpont Morgan (as in J.P. Morgan) gave to the Bank and Currency Committee of the House of Representatives in Washington, DC in December of 1912. The committee was investigating the workings of Wall Street at the time.  The below quotes are between Morgan, "the uncrowned king of finance" (I would say so!), and Samuel Untermyer, the Committee's lawyer.

Untermyer: "Is not commercial credit based primarily upon money or property?"

Morgan: "No, sir, the first thing is character."

Untermyer: "Before money or property?"

Morgan: "Before money or anything else. Money cannot buy it."

Turns out there are many financial institutions that agree with him. Recently, the Fair Isaac Corporation (FICO) began implementing new strategies for assessing a consumer's creditworthiness. In addition to looking at the information offered on social networking sites, the agency will also be looking at smartphone records. They believe that if you look at how many times a person says ‘wasted’ in their profile; it has some value in predicting whether they’re going to repay their debt.  I guess it could be true that if you are 'wasted' on Facebook, it may damage your credit score.  FICO rebutted this FT article by saying they only view the data as being predictive about whether a consumer will repay their debt.

FICO went on to say that they are, however, using the data in determining credit worthiness for people who have been off the grid; in other words have no credit history. The Consumer Financial Protection Bureau estimates that roughly 26 million Americans have no credit history which makes them invisible to the system.  There are 19 million more whose history is insufficient or outdated and thus not able to get a commercially available credit score.

Expanding on those with no credit history, there are companies cropping up, like Lenddo that are using alternative means to determine creditworthiness of borrowers.  This is especially key in countries like the Philippines where 70% of Filipinos do not have bank accounts and only 4% have credit cards.  It is not surprising that Lenddo is a Manila based company.  They use data from mobile phones, email behavior, and social media to determine a person's repayment behavior.

While ultimately I think that these are small steps for mankind, I do think there is an element of Big Brother here that is just a touch creepy.  More importantly, a base minimum of education about credit and compounding interest needs to be baked into lending to those that have not had access to credit before.  Heck, everyone would probably benefit from a little Consumer Finance 101!  In all seriousness, those who have new access need to be aware of what this means for them in the long-run...after the excitement of starting their company or buying a new home wears off.