Will your web history soon impact credit score?!

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Did you just mistakenly visit a website that isn’t the most family-friendly? 

Your credit score just went down.

Streaming a football game on one of those pirate sights?

Watch your FICO fall.

Clicked on that pop-up that starts barraging your browser with ads?

Sorry, but your credit report was just flagged with a negative item.

Yup, your web history may soon influence your credit score. 

Although it may seem like a Netflix series about a Dystopian future, it may be the reality that’s facing us. Go one shady or illicit websites, and your score could drop, costing you dearly when it’s time to qualify for a mortgage, take out an auto loan, or even get insurance coverage.

As of now, your credit score is based on more clear standards that are simple for consumers to understand and work to improve. The credit scoring algorithms are based on five factors, including:

35% Payment history.

30% Amounts owed.

15% Length of credit history.

10% Credit mix.

10% New credit.

 

So, if you want a better credit score, you simply pay down your debt, get the right mix of credit, avoid inquiries and maxing out credit cards, and hire Blue Water Credit.

But remember that the whole credit scoring system isn’t designed to benefit you, the consumer, but companies, lenders and financial institutions who want an accurate barometer of risk when lending more money.

Our credit scores and reports not only influence every loan we apply for, but our insurance rates, utilities, or even the change to get our dream job when employers pull credit. 

However, companies and lenders are always looking for new and illuminating ways to deep dive into a consumers use of credit and their risk of defaulting, and new research suggests a link between the websites you visit and good (or bad) credit.

On their website (ironically), the International Monetary Fund (IMF) alludes to an emerging trend of companies and lenders seeking a borrower’s digital footprint, which is a vast network of not only our personal information, but search histories online, what we’ve bought and from whom, our searches, and much more.

A study and ensuing white paper by the International Monetary Fund outlines how the marriage of credit reporting and our digital footprints vastly “improves loan default predictions.”

Eager to provide any tools and innovations that sharpen their prediction models on loan default, the credit bureaus are sure to pander to increased demand from companies and lenders, their clients. And with artificial intelligence and advanced scraping methods that find, document, and organize our personal and financial information online, it’s just a matter of time before our web usage influences credit reporting.

But is that a good thing? Of course, we can easily deride the unending advancement of technology as a march towards an Orwellian future, and therefore something to be resisted at all junctures.

But credit experts point to the possibility of web history actually improving a borrower’s credit score, and that it may be another tool for those who are credit-light or credit invisible to establish a better score. 

Each year there are millions of “unscorable customers” who are shut out from legitimate lending systems, and tens of millions more could benefit from responsible use of web usage to cement and improve their scores.

In fact, in order to receive a valid FICO Score, the credit report must have:

  • At least one account opened for six months or more, and
  • At least one account that has been reported to the credit bureau within the past six months, and
  • No indication of deceased on the credit report (Please note, if you share an account with another person this may affect you if the other account holder is reported deceased).

The minimum scoring criteria may be satisfied by a single account or by multiple accounts on a credit file. In certain rare cases, whether a given credit report qualifies for a FICO Score may vary across different FICO Score versions.

(You can find out more here.)

So, what’s the downside of our web activity being tracked, amalgamated, and used as a factor in credit scoring?

If this becomes a reality, the intrusion into our personal lives would be hard to ignore as an invasion of privacy. Even the IMF, in their white paper, admits it’s a “efficiency-privacy trade-off.”

The IMF white paper goes on to say, “The increasing use of private data for financial services also raises a myriad of consumer protection and privacy issues that require the government to set standards for data collection and use.”

Pundits say that our legal web usage in the privacy of our own homes should have no impact on huge lending decisions that could cost us vast sums, or even prevent us from homeownership, accessing student loans or business lending, etc. 

And should we be penalized if Google, Apple, almost any brands, shopping websites, etc. aggressively target us through advanced algorithms and ads? 

It doesn’t seem like a fair trade-off, but the good news is that no partnership between web history and the credit bureaus is imminent. 

And no matter what develops, the fundamentals of good credit will ALWAYS be the same!

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