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Can Facebook Cause Credit Problems?

By Gina Pogol
Mortgage Credit Problems Columnist


Mark Asks: Dear Gina, I want to apply for my first mortgage. I don't have major credit problems, but I don't have much of a credit history either. One of my friends told me that lenders look at your Facebook and Twitter posts and that they can decline you for a mortgage if the posts are bad. Is this true?

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Gina Says:

Hi Mark,

The answer is no.....and yes. Larger lenders probably won't bother checking out your social networking when underwriting your file. Their mortgage underwriting is largely done with software and they don't care about your beer-bashing friends or how many tattoos you have.

However, if your file is underwritten manually, which it might be because you have what is called a "thin file" or minimal credit history, you have an increased chance of undergoing more scrutiny. If you're very concerned, look at an FHA mortgage with government-defined underwriting criteria. There is ample provision for manual underwriting with no mention of extra-curricular snooping.

So How Does Social Networking Affect Your Credit?

The whole idea hit public consciousness when a company called Rapleaf was found to be mining social networking sites to create profiles of people for targeted marketing efforts. This is just marketing, not having anything to do with credit decisions, the company's owner said. However, other consumer lenders say having a wide network of friends can expedite getting a loan, while discrepancies between your credit application and your Facebook profile information can raise red flags. And if you are self-employed, don't mention business problems. If you're not, don't bad-mouth your company or tweet about rumored layoffs.

Other Credit Problems

If you go to a private investor or hard money lender for a mortgage, expect a more intrusive check into your finances and background. Or how about that smaller local bank that makes a loan when others won't? These lenders can be lifesavers when your square loan doesn't fit into a round hole, but expect that your credit check may be less orthodox and could involve your social network. As long as the lenders' portfolios are small enough to give them the ability to look at individual applications case-by-case, they can use any publicly available information to supplement their loan decision.

One area where Facebook, Twitter, and other services have provided gobs of information to lenders is in collections.

Bill collectors troll the Internet to investigate your financial situation, and finding out that you have an active social network may cause them to push you harder. A post about a fabulous dinner out, a vacation, or a new car lets creditors know you have resources and can repay them.

Small niche lenders may also look into social-networking information. "Say you're trying to get a second mortgage on a house and a private investor is providing the financing," says Tom Crooks, Global Analytics general manager. The investor may use any publicly available information to supplement their loan decision. "And they have the right to. People forget that the Internet is public."

What About Privacy Settings?

Of course, you should tweak your privacy settings to keep your own stuff confidential, but there isn't much you can do about your friends. Make sure that you untag yourself in any compromising photos posted by friends. Be careful about who you friend--fair or not, some lenders do judge you by the company you keep.

Sources

http://www.smartmoney.com/ / http://www.wtopnews.com

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