Digital Footprint Credit Score

What is a digital footprint?

A digital footprint is the trail of data that individuals leave behind when using the internet. This data can be created knowingly or unknowingly when using websites, apps, and digital services. Whether allowing apps to access personal information or permitting websites to track behaviour through cookies, these footprints are collected by data analysis companies. For lenders, digital footprints provide valuable insights into a person's financial behaviour, helping to gauge creditworthiness and protect against identity theft.

Types of digital footprints - Active and passive

Digital footprints fall into two categories: active and passive. Here's the distinction between the two:

1. Active digital footprint
An active digital footprint is created when an individual knowingly shares information online, such as through social media posts or by subscribing to newsletters. For example, when a borrower signs into social media platforms using their email and password, the platform collects and analyses their activity, including posts and interactions. This data helps companies understand consumer behaviour, and this intentional sharing is classified as an active footprint.

2. Passive digital footprint
A passive digital footprint is created without a user's knowledge. Websites, for example, track visits, IP addresses, and behaviour without explicit consent. Social media platforms also collect data in the background about user activity, such as which posts were liked or commented on. This unintentional sharing of data is classified as a passive digital footprint.

The relationship between digital footprint and CIBIL Score

Digital footprints are now playing an increasing role in alternative credit scoring models, helping lenders assess the creditworthiness of borrowers, particularly those from underbanked sections of society. Let's explore how this relationship works:

1. How digital footprint can affect CIBIL Score?
Digital footprints encompass data collected from social media interactions, browsing habits, and web activity. For example, factors like purchase history, browsing patterns, and IP addresses can be analysed to predict a borrower’s credit behaviour. Borrowers with an active digital presence are more likely to have their creditworthiness evaluated based on this data. A poor or erratic online behaviour may negatively influence their credit score.

2. Role of social media in digital footprint
Social media is a significant contributor to a person's digital footprint. Every post, like, comment, or share adds to your digital profile, which can shape how financial institutions view your financial responsibility. Social interactions, particularly on professional platforms, can influence lenders’ perception of your credit reliability.

How financial institutions use digital footprints to assess creditworthiness?

Banks and other financial institutions use data from digital footprints, including online presence and identity details, to evaluate creditworthiness and identify fraud risks. This data is especially useful for assessing individuals who may not have a formal credit history but exhibit consistent and responsible online behaviour.

By understanding and managing their digital footprints, borrowers can ensure that their online behaviour supports, rather than undermines, their credit profile.