Want more proof that there is a downside to social networking? Look no further than the latest nitwit banking industry scheme to determine your creditworthiness.InternetEvolution.com blogger Rob Salkowitz recently posted an outstanding summary of the latest data-mining trend: using social networking data to assess credit risk. If your Facebook friends are deadbeats, it might be harder for you to get a credit card or mortgage, according to a recent report on the banking industry site, CreditCards.com.

Thats right: Some banks are turning to social media analytics firms to help enhance their credit-check procedures by looking at an applicants profile, behavior, and associations on sites like Facebook, Twitter Inc. , and MySpace . The theory is that people run with folks who share their values and behavior -- birds of a feather, and all that. You might even say "guilt by association," but that would be unkind.

Salkowitz's source is a news article on CreditCards.com that provides a wealth of additional details. But here's the gist: "The presumption is that if those in your network are responsible cardholders, there is a better chance you will be, too.

"So, if a bank is on the fence about whether to extend you credit, you may become eligible if those in your network are good credit customers."

Lenders are eager to spin this insanity as a legitimate risk-assessment technique. Lending Club executive Rob Garcia, for example, says that a Facebook user whose home address does not match the address on an application "could be a red flag." He also asserts that people who have large networks "get funded two to three times faster than without."

I'm ready to throw a few red flags here myself. The most obvious snag concerns a lender's ability to prove that someone on a social networking site -- or that someone's friends -- are who they claim to be. Most of us know that a Web search on our names will turn up dozens or even hundreds of virtual doppelgangers; without a Social Security Number or other unique identification, how is it possible to tell any of them apart with certainty?

Sooner or later, somebody will realize they were denied credit based on another person's social networking data. Normally, I'm not a fan of rampant litigation, but in this case I can't wait to see a little carnage in the courts.

Let's also consider the fact that lenders want to position this as a "whitelist" technique that can only work to an applicant's advantage. Unfortunately, the data-mining techniques being used here are utterly opaque to consumers, as are lenders' policies regarding how, when, and why they consider this sort of information.

Soon, I'm sure we will see the usual bottom-feeding "credit repair experts" offering to build credit-friendly social networking profiles for a not-so-reasonable fee. The thing is, given the sort of information lenders are apparently mining from these sites, it just might work.

Many people already understand that their social networking activity can draw unwanted attention from employers. Make a joke about taking one bong hit too many last weekend, and you can wave goodbye to that big job interview.

When credit issuers start snooping around, however, it's a different matter entirely. This isn't a question of making common-sense decisions about what you post online. These companies are using actual social networking relationships to make business decisions.

As Rob Salkowitz points out, it is hard to see any way out of this dead-end except through regulation. In the meantime, if you use a social networking site, I suggest checking -- and rechecking -- your privacy settings.

Ultimately, however, the only way to opt out of this sort of buffoonery might be to "opt out" of certain social networking sites entirely.