Social networks like Facebook (FB), Twitter
Instagram and Snapchat may be fun for many, but can have their downsides.
People have lost their jobs because of images or messages they posted, while employers
and colleges scrutinize people's online profiles for hints about their personality.
Add loan companies to the list of businesses interested in mining the Web for details about consumers' online lives, according to The Wall Street Journal. And while the practice of picking through potential borrowers' social media information is mostly limited to startup lenders, there's a good chance that your online persona will increasingly get connected to your credit profile.
The approach is similar to how other organizations already use social networks -- checking a person's profiles and posts for hints about who they really are. For example, an employer might look for publicly posted photos that show a candidate drunk or taking drugs. A university could comb through status updates that indicate someone cheated on their schoolwork. Workers' comp investigators may look for evidence that someone claiming disability is actually working or fully mobile.
It's that sort of revealing information that fledgling lenders, some backed by the likes of Google's (GOOG)
venture capital arm and top venture capital firm Accel Partners -- look for. A loan applicant
might claim to be employed but admit online that he or she was just fired. They might also allude to financial problems, or even disclose information that conflicts with data provided in their loan application form.
According to the Journal, the loan companies investigating social media are focusing on subprime borrowers. The hope is that looking through social media can help them decide that a given person might be worth the perceived risk.
Another potential use of consumers' social media info: credit ratings. Fair Isaac Corp. (FICO), a
major supplier of credit scoring information,
is looking at incorporating social media information, although it says that
such data is not yet predictive enough to be useful.
Widspread use of these methods presents potential problems for consumers. Lenders and other financial firms could misinterpret or fail to verify information on social networks. People could endanger their ability to get credit through thoughtless posts or even outright mistakes, like not updating a work history on a site like LinkedIn (LNKD).Under federal law, consumers can challenge information in their credit files, forcing reporting companies such as Experian and TransUnion to confirm the information. People have various legal channels available to review information, correct mistakes, and remove items that are wrong. But for now taking information directly from social networks is not covered, leaving consumers with little to no practical recourse.