Borrowers Hit Social Media Hurdles

More lending companies are mining Facebook, Twitter and other social media data to help determine a borrower's creditworthiness or identity, a trend that is raising concerns among consumer groups and regulators.

Lending companies -- some of which are backed with venture funding from Google Ventures, the venture-capital arm of Google, and Accel Partners, an early Facebook investor -- are looking at potential problems such as whether applicants put the same job information on their loan application as they posted on LinkedIn, or if they shared on Facebook that they had been let go by an employer. A small business that draws negative reviews on eBay also could undermine its chances of getting more credit, lending companies say. The practice is being used largely by startups that grant smaller loans, but the concept seems likely to spread. Fair Isaac, which provides the credit scoring used in more than 90% of lenders decisions, says it is weighing possibilities for incorporating social media. "There could come a time where certain social media could be predictive and we're looking at that, but it isn't yet," said Anthony Sprauve, senior consumer-credit specialist at FICO. Consumer advocates say the trend increases the chance borrowers, including small businesses, will be unfairly denied credit or saddled with higher interest rates based purely on their social media presence. They say federal laws haven't kept up with the trend, leaving borrowers exposed. Regulators are watching the trend and trying to determine whether to police financial institutions' use of online data in credit scoring, officials say.