‘Tap social media to identify creditworthiness’

Networks like LinkedIn and Facebook are useful in identifying discrepancies in the information provided by a person.

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Credit bureaus in India use only some sources of data to identify the creditworthiness of an individual, while those in countries like the U.S. use a plethora of information, including social media data, according to a top official of a non-banking financial company operating in India.

“In India, the big risk is to identify fraudsters,” Arun Ramamurthy, co-founder, Credit Sudhaar said.

“The bureau uses only some of the data in the market. In the U.S., the bureau uses credit data, telephone bills, social data and a host of other sources.”

Fraudsters

“Six per cent of the people who sign up for our advisory services are intentional defaulters and fraudsters,” Mr. Ramamurthy added.

It is only through the use of psychometric tests, social media data and other unconventional sources of information can companies and banks identify the intention of a potential borrower, he said.

“We started off with an advisory programme, a credit health improvement plan,” Mr. Ramamurthy said. “We administer various tests to figure out potential borrowers’ intentions. You can fool some of the people all of the time, all of the people some of the time, but not all of the people all of the time.”

“Using concepts like big data, social data like LinkedIn, Facebook, psychometric tests and behavioural tests, we differentiate intentional defaulters and situational defaulters who just did not know,” he said.

Social networks

Networks like LinkedIn and Facebook are useful in identifying discrepancies in the information provided by a person.

“If an individual tells us that he works for, say, the Tatas, but his Facebook profile names some other company, then that is a red flag,” Mr. Ramamurthy said.

People often do not know little things like getting a credit card and using it only rarely does not provide the credit bureau with enough information to gauge creditworthiness.

Another mistake they often make, according to Mr Ramamurthy, is to settle pending amounts with banks—paying the bulk of it, after which the bank closes the issue. While this clears the issue with respect to the bank, it still leads to a poorer credit score with the bureaus.

The best way to have a good credit score, Mr. Ramamurthy said, is to use a credit card regularly and clear its dues on time.

That gives the credit bureaus enough information to work with, and shows your creditworthiness.

Published - July 10, 2016 10:42 pm IST