Schmooze Your Way to Better Loans

You may think your Facebook friends are only good for liking your profile picture or sharing funny pet videos; now, they might also help you get a lower interest rate.

According to a new study in Marketing Science from Chris Dellarocas, BU’s associate provost for digital learning & innovation and Richard C. Shipley Professor in Management, having a financially responsible social network could be your key to securing a loan. Dellarocas’ research, conducted with professors from the University of Pennsylvania, investigates the increasing number of firms using network-based data, such as education, employment history, and personal connections, instead of traditional financial history, to judge creditworthiness. According to the study, such firms claim that using these criteria for credit scoring extends opportunities to a larger population and benefits lower-income individuals who might normally be denied a loan. If you have financially responsible friends and family, the theory goes, you likely pose a low default risk, too, resulting in greater credit access.