Growing Databases Catch Financial Fibs
If you’re ever tempted to stretch the truth about your circumstances on a loan application, rental lease or resume, remind yourself that you now live in a high-tech information age.
You may have been told that “everybody fudges a little” in the course of managing their money and their personal affairs, whether they’re doing their taxes, trying to line up a mortgage or competing for a job.
But you should also be aware that new systems are being developed all the time in computerized communications and data processing to verify what you say about yourself on any form.
Where once it might have been too time-consuming, too expensive or just too much trouble for some other party to check up on you, that no longer may be so.
“Lying is endemic in modern life and in real estate,” says John Reed in Real Estate Investor’s Monthly, a newsletter published in California.
“Resumes have long been inflated. Prospective tenants lie about where they’ve lived, their finances and so forth. Prospective mortgage borrowers lie about income and net worth.”
But now, Reed observes, “massive databases, combined with higher-speed, higher-capacity computers, will make it extremely hard to lie in the near future.”
For a vivid example of what is happening, consider a cooperative effort between the Internal Revenue Service and lending institutions that is now getting a pilot test in California.
It allows lenders to compare notes quickly with the IRS on income claimed by loan applicants. If applicants list a significantly bigger income with their loan request than they reported to the IRS, they may face a tax audit and even criminal prosecution.
“People sometimes are tempted to bump up their income figure in order to qualify for a loan,” says Sidney Norton, president of the California Society of Enrolled Agents, an association of federally licensed tax advisers. “That is not a good idea.
“Everyone who applies for any type of loan should be aware that deliberately falsifying income information can have serious consequences.
“What’s important for loan applicants to understand is when they provide income information, the figures should be accurate. The lender can verify them from other sources, including IRS.”
Reed says the Internet, in particular, has opened up many new avenues for even small operators, including both landlords and prospective tenants, to double-check facts and figures provided by other parties.
A great deal of information about everybody is already public, Reed notes - in birth, marriage and divorce records, for starters, and also in mundane material such as business cards that you may hand out regularly.
A lot of this information used to be cumbersome and expensive to obtain. But in a high-tech world, that’s less true all the time.
When people draw up resumes or biographical sketches of themselves, there is a natural temptation to “exaggerate, lie and mislead by omission,” Reed notes. “The Internet and advanced computers will likely end self-created resumes.
“You can still create them. But no one will care. They will already have a version of your life story from the Net.
“All public information is about to become instantly available, 24 hours a day, at little or no cost.”
This may justifiably alarm anyone who thinks about the potential for trouble it raises - not just in lost privacy, but in the havoc a simple administrative mistake or sloppy record-keeping might wreak in an innocent’s life.
Ask anybody who has gone through the frustration and anger of finding wrong information in his or her file at a credit reporting company, and of getting the erroneous entries expunged.
But no matter what is done about concerns like these, the advance of new information technology looks inevitable.
“High tech is going to take the lying out of real estate,” says Reed. “It won’t change people’s character. Rather, it will reduce the number of times people are asked to provide information, and dramatically increase the probability that liars will get caught.”