August 14, 2015
The digital world has come to life with virtual employees. Working from home is now a viable option for millions of people. Securing financing remains a difficult process, however. Without a regular income, it’s difficult to have a high credit score. It unfairly penalizes people who decide to run an online business.
Social media is one way to tell someone’s true character. Whether someone has a good following and what he or she says can say a lot about a person. Nevertheless, are they the new credit reports in the digital world?
Another Way to Borrow
It sounds insane at this point and a long way off. While the latter is most definitely true, things could be changing. A good credit history report and a strong social media profile will be able to offset the problems caused by running your own business online, often from home. Some lenders will make it easier for these groups to obtain finances.
Good Financial Habits
This doesn’t mean you’ll be able to ignore the need for good financial habits, though. Sources involved with what is being termed as ‘open scoring’ state that certain financial behaviors must be met in order for anyone to benefit from open scoring.
- Keeping overall borrowing rate to 30% of the maximum or lower.
- Not applying for too many credit cards at the same time.
- Making payments in full and on time.
Why Will a Social Media Profile Matter?
To understand the importance of social media it’s important to understand what a credit score is for. It’s simply a method of quantifying how trustworthy someone is. It doesn’t mean anything beyond this. Social media can help to determine whether someone is trustworthy.
For example, someone with a big presence online and a good reputation is likely to be trustworthy. They have to be if they want to maintain a strong following like this. On the other hand, someone who’s known as an online cheat or sneak will likely display the same unenviable attributes when it comes to borrowing.
What’s the motivation for this?
Sources say lenders could gain access to 15 million Americans who’re currently unable to gain credit because they either have no credit or bad credit. Other countries are also looking at this. The Internet and Mobile Association of India, for example, claims 600 million new users could be online with social media profiles.
This is good news for virtual employees. Previously, they may not have had any credit rating, so they had no choice but to not lend money. This new system could change the playing field and enable perfectly reputable people to obtain funding for the first time.
A Long Way Off
Sadly, this is a system that’s likely a long way off from coming to realization. It’s difficult to implement and it will require a huge change in mind-set on the part of the finance industry. Nevertheless, within the next few years we could see this sort of system become a reality.
Image Credit: Flickr/Jason Howie
Did you like this article?
Get more delivered to your inbox just like it!