Building Better Credit Scores

Weeks ago, Business Insider profiled a few of the Chicago-based start-ups that angel investors Brad Keywell and Eric Lefkofsky, best known for backing Groupon, are funding, including an intriguing stealth concept: a company that leverages “the power of the social graph” to build more reliable and more meaningful credit scores. This is exactly the kind of idea that drives my left-of-center friends up the wall, and I love it. It is a sociological truism (or is it a lazy assumption?) that we are like our friends, hence childbirth and obesity are “contagious.” Something similar presumably applies to our financial proclivities.

The difficulty lies in identifying our true social graph. When money is at stake, it becomes important to weight different relationships appropriately. And of course money being at stake will incline us to “curate” our social graph, to make it less like our real social relationships and more like an idealized version of the same — or rather a version designed to maximize our credit score, or whatever other metric we’re looking to game. 

Regardless, we have to start somewhere. This is one reason why I now think I was foolish to cheer on cutting out the for-profit middlemen in the student loan industry: apart from creating a political constituency that would resist populist loan forgiveness, private providers like MyRichUncle really did find new and smarter ways to identify good credit risks. There is value in that.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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