You might be wondering, can my web history impact credit score? Well, the short answer is yes. Keep reading to find out more.
Have you ever considered your web history as important to your financial life?
Well, very soon your internet habits just may be. In the near future, your web history could impact credit score and, therefore, the kind of house you buy or even what you pay on your car loan.
Currently, the credit score is a three-digit number that is arrived at from assessing your debt level and payment history.
A working paper posted on the International Monetary Fund (IMF) website, however, hints at companies possibly widening their scope of data collection to get a better picture of borrowers and the risk they carry.
The researchers say lenders could soon take a look at your search, browsing, and shopping history to obtain a more accurate credit score. This may be the future of lending.
Citing other studies, the researchers show that using both credit information and your ‘digital footprint’ offers better loan default predictions.
Most of this digital information is readily available but what is not can be provided to credit bureaus.
It may sound rather odd and spy-like, with someone watching your every digital move but that isn’t the case.
Machine learning and artificial intelligence would instead be tasked with scraping this data and then turning it into information suitable for a credit report.
Who Benefits when Web History Impact Credit Score?
On one end, some may not like the thought of lenders looking at their browsing data. This feels very personal and possibly a violation of private space if nothing else. On the flip side, those who don’t have a good credit rating from traditional financial institutions could benefit from this.
Consumers who have been ‘unscorable’ could access credit and those with a credit score teetering between medium and low could either increase it or lose access altogether. This is according to a 2018 study by the Frankfurt School of Finance and Management.
The pandemic, for instance, hit many people and left them with late loan payments thus denting their credit rating. Lenders were therefore not quick to give good deals even though mortgage rates significantly dipped to historic lows.
With this other system, lenders could look at your browser history and your purchases would let them know how trustworthy you are. This would be viewed as the bump it is and not a negative character trait of your doing.
Considering people’s digital footprint would essentially bolster financial inclusion for those that have had difficulty getting credit in the past.
Are There Any Risks Involved?
While these changes remain speculative and seem far off at the moment, they could potentially come to pass. They provide quite the advantage but at what price? The biggest worry would be privacy and data security.
The researchers admit there would be an ‘efficiency-privacy trade-off.’ With an increase in the use of private data in financial services, the government would have to set standards for data collection and use, the researchers say.
The paper notes that the U.S. does not allow the use of race or gender information to make lending decisions but this still leaves room for other kinds of data to be misused. What data is important and what isn’t? How will the information collected remain in the right hands?
Big Tech is not as highly regulated as the banking industry but data privacy would have to be monitored for this to work. That poses a problem in itself since the industry is very fast-paced and governments may take time to come up with necessary policies.
How Do You Build Your Credit Score?
Before they figure out how much your web history could impact your credit score, you need to build a solid credit score. It will increase your borrowing limits, a mortgage, lower interest rates, a credit card, and personal loans.
Some landlords look at your credit rating before deciding to offer their house to you too. The old-fashioned way is the way to go for now and the best approach to this is:
- Regularly Check Your Score
It may seem pointless but knowing where you lie will keep you on the right track. Stay aware and alert on your progress. It becomes much easier to spot any odd activity too.
There are services you can use that will allow you to access your score at no cost and send you alerts whenever a change occurs. That way you can adjust your habits before things go too far.
- Build a Good Track Record
A good record begins with making payments on time. Ensure you pay your credit card as expected to build a good credit history. If regular cards are not an option, specialized credit cards will still serve the purpose.
- Debt Consolidation
Having many small debts with high-interest rates poses a big challenge to your credit score. The debt level is very critical for the credit score decision. The best option is taking a low-interest debt consolidation loan to pay off all the high-interest debt accrued.
That leaves you with one loan to pay off that is more manageable. It also looks much better on paper.
- Be On the Lookout for Fraud
This is why regularly checking your credit rating is necessary. A little fraudulent activity and your credit rating could take a beating.
It can easily ruin all the hard work you’ve been putting in over the years. Any suspicious activity caught in good time could save you a lot of unnecessary trouble.
Get Ready, Do It Right
Life as we know it keeps changing and technology will keep offering newer and better ways of doing things to accommodate the changing landscape. Whether web history can impact credit score is still up for research but preparing for it won’t hurt.
Keep shopping wisely and keep your online activity in check. Fill out your LinkedIn profile and show off your skills while you’re at it.
We’ve seen bigger and crazier innovations within the Big Tech space and who knows where this could end up?