How Lenders Could Be Looking At Your Digital Footprint

Traditionally, lenders have assessed applications for loans based on three main factors; affordability, your credit score and security. These three key factors are the most common areas in which a lender will assess how likely you are to default. A poor credit score could see your applications for a loan being denied, your offer reduced or become more expensive and this works similarly to those who lack affordability and have no security.

Despite these factors, recent studies from Tobias Berg at the Frankfurt School of Finance & Management along with other sources, suggest that your digital footprint could be used by lenders to determine your risk of defaulting. Greatly affecting how likely you are to receive a loan and at what cost.

Within the ongoing study, a team of researchers analyzed over 270,000 purchases from October 2015 to December 2016 on a German e-commerce website that allows customers to buy furniture and pay for it later through a loan service. The store was already particularly well known for using a digital footprint alongside the user's credit score to decide who qualified for a loan and therefore showed clear indications of what affected default rates. Factors included what device was used to apply, at what time the user applied, how their email address was written and their social network circle.

The study is supported by the growing popularity of Lenddo, a Singapore based company which is already using digital footprints on a growing young population to determine customers' financial stability.