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Credit company says it isn't peeking at social media data

Are postings on Facebook and other social media off limits in determining your creditworthiness?

Fair Isaac Corp., creator of the widely used FICO credit scoring systems in consumer lending, insists social media is not being screened despite multiple reports in the media recently that seemed to indicate otherwise. It was the topic of my column a week ago.

My column noted that Fair Isaac had recently added new layers of information to determine who is creditworthy and who is not. The new data, which is part of a pilot program, take into account such things as how well some consumers pay their cable TV, smartphone and utility bills.

According to Fair Isaac, this information is aimed at millions of people who have had difficulties getting access to credit or who are new users of credit, such as college students and other young consumers.

While Fair Isaac is looking at alternative data, it said in a statement to me this week that "at this point, social media data is not part of any FICO score."

The confusion over the use of social media appears to have started when Fair Isaac's chief executive, Will Lansing, was interviewed last month by the Financial Times. In that conversation, Lansing said this: "If you look at how many times a person says 'wasted' in their (Facebook) profile, it has some value in predicting whether they're going to repay their debt. It's not much, but it's more than zero."

Fair Isaac said the comment and accompanying headlines that focused on how "being wasted" may damage your credit score "created a misperception" about the company's credit scoring policies.

Christina Goethe, Fair Isaac's director of communications, said Lansing was "talking generally about the fact that different types of data have different levels of predictive value" in terms of being a credit risk or not.

Goethe said there were several important reasons the company is treading carefully with social media data.

FICO scoring systems have been redeveloped numerous times over the years to keep up with the behavioral trends of consumers, Goethe said, "but changes to the score are made cautiously after exhaustive research."

Unless social media information is "proven unequivocally to be predictive of credit risk, it will not be part of any FICO score," she said.

Goethe also said that if social media posts were collected and used to generate a credit score that influenced whether a person got a car loan or a credit card, then the decision would have to comply with all fair credit reporting laws and regulations.

"This includes enabling consumers to dispute the data used to calculate their FICO scores," she said.

The dispute resolution process, she said, would be very difficult and need to be refined.

Meanwhile, Fair Isaac and its credit card test partners are focusing on whether some consumers pay their cable bill and other forms of alternative data to crunch credit scores. A full rollout of this system, called FICO XD, could come early in 2016.