Truecaller acts on a give and take scenario... You want those unknown numbers then you have to part with your phone contacts. Now apparently everyone who have installed the app has surrendered his phone book. The data is crowded from the millions of users who have downloaded the truecaller app on their smart phones. As part of the end user, the truecaller app asks the user to allow access to the user's contacts on the smart phone. This data is then uploaded by the app to the company servers. After going through several data matching/refining algorithms, this data is then available to the truecaller users to search upon.
The story must start from the login screen first. If you have already been using Truecaller, you might have seen that Truecaller only allows either Facebook, Gmail or Yahoo to access Truecaller app. If you don't have one you cannot connect to Truecaller database. This is because, FB, Gmail and Yahoo! are the most widely used social networking sites that contain a lot of phone numbers and contact details. It implies that when you use one of any social sites, your entire contacts including phone email ids, contact names, numbers will be uploaded to a secure Truecaller server. In case you login to the app using your mobile phones then the entire address book will be sent to the Truecaller servers.
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