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Could having friends with bad credit affect a loan application?

Since the popularization of the credit score, it has been true that filing for bankruptcy in Ohio or anywhere else in the country can have a detrimental impact on a person's credit score. However, when it comes down to it, many people find that filing for bankruptcy, such as under Chapter 13, can be a steppingstone to financial freedom and moving on from a difficult situation.

What hasn't been a consideration for people before now -- and likely still isn't -- is the fact that their friends' and acquaintances', bankruptcies and poor credit scores could impact their ability to get credit. This seems like guilt by association, but some lending companies are starting to evaluate applicants' credit-worthiness, in part at least, by looking at their friends' financial picture.

So far, the companies doing this are outside the United States for the most part. The companies involved say that evaluating people based on their relationships is a good indicator about how likely they are to pay back a loan. One company that does business in Asia and Latin America searches for applicants' friends on Facebook; if those friends have defaulted on a loan with the company, that could make them less likely to approve a loan.

Another company, based in Europe, says it looks at thousands of data points when someone is applying for a loan, including such things as how long people read the terms and conditions and if they complete the application using all caps (or no caps at all).

In any case, these factors don't need to determine whether or not bankruptcy is the best path to follow. An experienced attorney can help someone in financial difficulty evaluate their situation.

Source: CNN Money, "Facebook friends could change your credit score," Katie Lobosco, Aug. 27, 2013

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