Should your online activity, as well as the brand of phone you use, or the type of email account you have, be used by lenders to evaluate your loan application and predict the likelihood of loan default?

Research findings summarized in a research paper issued by the Federal Deposit Insurance Corporation (FDIC) in July 2018, show that, for example:

  • Customers who visit price comparison websites are almost fifty percent (50%) more likely to default on loans than those who visit such websites by being redirected through an online ad.
  • Email addresses that includes the name of the account owner are thirty percent (30%) less likely to default on loans than those that do not.
  • Those who use Android phones are more likely to default on their loans than those who use iOS (Apple) phones.

This research paper also suggests that when using personal digital information in conjunction with traditional credit reports and credit scores together, lenders can make better lending decisions and consumers are more likely to receive credit, than when using credit reports/scores, or digital information, alone.

Digital footprint data can be used by lenders to evaluate and help borrowers who lack traditional credit history or scores, such as recent graduates or immigrants.

What does this mean to you?

Digital footprint data could be used by lenders to evaluate and help borrowers who lack traditional credit history or scores, such as recent graduates or immigrants.

A lot of questions remain to be answered before lenders begin to use personal digital data in the evaluation of credit transactions, but the research concludes that such information can reveal valuable and reliable information on a person’s character and reputation to predict repayment behavior.

It is safe to assume that technology will have a growing role in lending just as it does in other aspects of our lives, and hopefully it will be for the benefit and wellbeing of both, borrowers and lenders. Stay tuned!

Three next steps