So, if Facebook has it’s way, your excellent credit score could suffer because of your relationship with an old friend or relative, who you love dearly but to whom you would never loan money.

This Venturebeat article reveals that Facebook and Mark Zuckerberg own a patent that factors social connections into what content gets delivered and to whom. The latest update to the patent is causing concern in the media because it applies the process to applications for credit. This means that, if this does become part of the process, the people you connect with on Facebook could become liabilities in your applications for financial services.

I don’t think we’ve heard the last of this; assuming it gets deployed, either credit will get tougher for many people or there will be legislation. Alternatively, banks have funds that they will have to lend anyway, and so standards will likely adapt downward but will it change the balance of winners and losers?

Looking For A Purpose Perhaps

The article describes the use-case that Facebook puts forward in its application to update the patent. Previous versions restricted inappropriate connections. This update seems to be more focused on Facebook making itself indispensable in the credit application process, with the possibility of unintended social consequences for applicants who have diverse connections.

Like the insurance markets that want to have detailed information about risk it will most likely hurt some while not impacting others, while saving finance companies some costs. The principle of the rising tide seems to apply, or in this case the tide going out lowers all boats. What it will do is reveal a new set of red flags that will cause rejections.

The question becomes: Does the use of credit scores in your network as indicators create a situation that is unfair? Will there be real discrimination that will benefit the banks’ bottom lines at the expense of a particular class or social group.

The Future Of Unintended Social Consequences

The real, long-term, hazard could be something as profound as changing the way that we engage on social networks; will you want to look at the credit score of that casual acquaintance before you accept their connection request? Will that have a chilling effect on economic activity and make the world a more stratified and insular place? Only time will tell.

One thing is certain: the use of social connections in our daily lives as a source of information and in how we are marketed to is going to be a bigger and bigger factor in the near future. Social media credit scoring is something to watch carefully as it inevitably unfolds.