Which agency uses online reviews in their credit score calculation and why?
We recently came across an interesting, yet concerning article about online reviews and business credit scores. It’s this article on Nav which asserts that credit scores are increasingly affected by online reviews.
For several years we’ve known that online reviews affect consumers’ decisions on whether to patronize businesses. As a result, this affects an establishment’s overall profit or loss. And now online reviews are being factored into the credit scores of businesses. According to the article, online reviews are a trusted, near-real-time barometer of businesses’ credit-worthiness. This explains the rationale.
Other risk indicators, such as account delinquency, may take months or even years to appear on credit reports. Lenders seek to reduce their exposure. That being said, online reviews are being looked to as reliable signs of a company’s ability to repay loans.
Not every agency considers online reviews in their credit score calculation. Experian — one of the leading credit reporting agencies — does. It may only be a matter of time before some others follow suit.
This is a troubling development. Especially given the rampant fake review epidemic on platforms such as Yelp, Facebook, and Google My Business. In light of this, it’s essential that businesses actively manage their online reviews. Not only is your next customer at risk, so too — apparently — is your next business loan.
Fake reviews may unfairly impact business credit scores, but they are being more deeply investigated than ever before. As a matter of fact, The Federal Trade Commission (FTC) is cracking down on fake reviews. Read more about it here.
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