Building a good credit standing is now possible through social networks, which means posts and friends on Facebook, Twitter and other social networks might influence your credit score.

Money shutterstock Financial companies now using social networks to gauge creditworthiness and reputation

The Philippines and Colombia are countries where a big majority of the populations do not own credit cards, nor do the populace have easy access to credit. And yet it is here where a financial startup called Lenddo has found its niche. The New York-based startup company uses a person’s social media standing in order to determine credit-worthiness, and will loan out varying amounts to clients depending on their social media connections.

While banks would traditionally rely on certain indicators like income from salaries and previous loan payments to determine whether to lend money, Lenddo does it differently. The system connects with a user’s Facebook, Twitter, Google and Yahoo accounts to determine a potential borrower’s “Lenddo score”, which is a combination of the standing of online connections. The more trustworthy a user’s friends are, the more likely he is to be approved for a loan.

Search Engine Journal says this move is effective in ensuring a person is within a community that has a good background in terms of credit. “The higher the social media presence, and the more high-quality friends a person has, the higher score the person might receive.” Users can also opt to elect up to three persons as “Trusted Connections,” which can further boost one’s credit standing if these connections are likewise reputable.

This can be considered as similar to one’s Klout score, which computes reputation based on the quality and quantity of one’s connections and social media activity. Lenddo goes a step further, however, because a person’s financial standing can actually depend on the quality of one’s connections.

This goes beyond individuals and their online friends, however. Reputation management consultants say that negative sentiment can actually badly affect businesses, as well. Companies have faced the wrath of irate consumers who complain on social media, and have seen their stock price drop, resulting in billions of lost value. Even the stock market is prone to volatility due to misuse of social media. This can perhaps underscore the importance of sentiment analysis in determining the thoughts among social media users. Case in point: Apple has acquired social analytics firm Topsy, and will be able to make recommendations based on social media conversations. This can extend beyond recommendations, however. Apple can use sentiment analysis to gauge what the public is talking about.

Forbes says that social media content can be sticky, and whatever users post on their Facebook or Twitter feeds might come up one day to bite them when least expected. Drunken, crazy or embarrassing photos might be reason for potential employers or universities to decline an application. Vint Cerf, an Internet founding father, has said that Internet users need a paradigm shift when it comes to protecting one’s privacy and respecting that of others.

Now that money might be on the line, it’s even more important to ensure you’re in the right company when it comes to online friends.

Image credit: Shutterstock