published Wednesday, March 26th, 2014

Personal Finance: Facebook posts may someday cost you a loan

Chris Hopkins

You never get a second chance to make a first impression. As in life, so also in social media. It is becoming increasingly common for third parties like lenders and potential employers to check out your online persona before deciding whether to transact with you. These days it pays to exercise judgment in what you post; it may come back to bite you.

It is evident that social media has touched a nerve, providing an outlet for expression and a medium of connection that was previously unavailable. According to Pew Research, nearly three quarters of all American adults on the internet are social media users. Facebook alone claims nearly 1.2 billion users worldwide.

For some users, this ubiquitous new form of expression invites the impulsive posting of more intemperate screeds, rants and pasquinades that tend to linger in the electronic ether long after their authors have forgotten them. Increasingly, this treasure trove of behavioral data is being mined by firms looking to supplement or verify information reported on applications. Knowing this should prompt a modicum of consideration before hitting "send".

Some small specialty lenders, for example, are now actively searching social media sites for additional clues on loan applicants. Using data from public postings, these firms attempt to verify personal information like employment status and look for behavioral clues. For instance, did you claim five years' employment on your application but Tweet about telling the boss where to go?

In addition to personal postings, these firms analyze Google reviews and other social media links searching for feedback from customers or associates to inform lending decisions.

So far, this practice has largely been confined to non-traditional lenders working with higher-risk borrowers like individuals and small companies shut out of traditional bank loans. But it might soon be coming to a conventional lender near you. Fair Isaac Corp., keeper of the most widely-used estimator of credit worthiness, is exploring the potential for use of public social media information and postings in supplementing the FICO score and verifying personal data. And in 2013 the company acquired Infoglide, a developer of fraud detection software that mines and analyzes massive amounts of data from postings on Linkedin, Facebook, and other networking sites. It wouldn't be much of a stretch to imagine them turning their guns on mortgage applicants.

Employers have been using social websites to check up on job applicants for some time; Harris Interactive reports that four out of 10 companies sift through public data on social media to research potential hires. And increasingly, debt collection agencies have been getting into the act, searching postings to help locate debtors or collect evidence that a borrower has lied about assets.

Evaluation of your veracity in the eyes of a lender, employer or bill collector can even expand into a look at those with whom you have connected online. Be careful of the crowd you e-run with.

In the internet age, nothing goes away and someone is always watching. If it's something your boss or banker wouldn't appreciate, it might be better to pick up the phone.

Christopher A. Hopkins, CFA, is vice president for Barnett & Co. Investment Advisors.

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