Lying on a Credit Card Application: Detection Methods & Consequences
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Summary:
When applying for a credit card, you’ll be asked to provide information such as your Social Security number, annual income, credit score, and permanent address. Lying on a credit card application may be tempting if you worry about not being approved. Credit card companies have several detection methods in place. If you are caught falsifying information, you could receive criminal charges, fines of up to $1 million, and a maximum of 30 years of jail time.
Can credit card issuers really tell if you lie on a credit card application? The answer is yes. The Credit CARD Act of 2009 requires lenders to determine if an applicant can make payments before lending to that person. To get credit card approval, you must provide financial data about yourself. If you lie about this stuff, you’re likely to get caught and face consequences. Keep reading to learn about applying for a credit card and what happens if you lie.
Can you lie on a credit card application?
If you don’t have a strong credit history, adequate income, or permanent residence, you may be denied some credit cards. This can lead more people than you might suspect to put inaccurate data on their credit card applications — otherwise known as lying. An estimated 10% of credit card applications contain incomplete or falsified information. Don’t be one of those people.
As tempting as it may be, lying on a credit card application is never a good idea. While you can put false information on a credit card application, you probably won’t get away with it. Credit card companies have technology and processes in place that detect lies, often quickly.
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How do credit card companies detect lies on credit card applications?
Applying for a line of credit isn’t the same as applying for something as large as a mortgage loan. Often you won’t have to provide proof for information on your application. However, if the issuer detects any red flags or possible scams, you can expect to be investigated further.
A financial institution may process tens of thousands of credit applications daily. While it can’t look closely at every application, it has several systems in place that can detect fraud on a credit application. The goal is to detect fraud before lending money to someone, but sometimes it is caught later on.
Since we only know how many liars get caught, not how many applicants lie and don’t get found out, we can’t say how likely someone who lies on a credit application is to get caught. All we can say for certain is that many who lie do not get away with it.
Fraud detection software
These days, technology helps financial institutions detect fraud and nip it in the bud. Since credit card issuers receive so many applications, fraud detection software helps to analyze an application’s data and search for any irregularities that require further attention. As this technology improves, more and more fraud attempts are stopped in their tracks.
Random income inquiries
Credit card companies don’t always ask for proof of income on your application. However, they do ask for proof randomly or if an applicant shows any red flags. This is one way they can detect suspicious activity and make sure applicants are being truthful.
Annual credit review
Lenders have the right to periodically review your information while you have an account open with them. Annual credit reviews can reveal discrepancies and expose credit fraud. Account holders may be asked to provide updated proof of income and more. This is a common method used to catch people who’ve lied on their applications.
Bankruptcy
Believe it or not, bankruptcy is the most common way credit card issuers discover fraud. People who commit loan application fraud often cannot responsibly handle the amount of money lent to them. It’s a slippery slope straight to bankruptcy for many liars.
Though filing for bankruptcy disallows most collection efforts through an automatic stay, lenders informed of bankruptcies will review application materials and correspondence for evidence of fraud, such as discrepancies between what a borrower told them and what the same borrower is now telling the bankruptcy court. If they do find evidence of fraud, the probability that they’ll send a representative to your bankruptcy court hearing is high.
A bankrupt individual will have to provide proof of income, debts, and assets to the bankruptcy court. If this information diverges widely from information provided to obtain credit, creditors are not likely to miss this. This is why bankruptcy filings are frequently what leads institutions to discover fraud.
Consequences of lying on a credit card application
However a borrower’s lying gets discovered, the consequences are not good.
Credit card issuers have requirements in place for a reason. On the rare chance that you get away with lying about your financial status, you’ll then be stuck with a credit card you can’t properly manage. That’s the least of your worries when it comes to consequences for lying on a credit application.
An application for a line of credit is a legal document, whether submitted online or in person. Falsifying personal information on a credit card application is a form of credit fraud called loan application fraud. Credit fraud is a federal crime, and it can come with serious penalties. Committing loan application fraud may warrant at the least a trial and closure of your credit card account. At the worst, if convicted, you could face fines of up to $1 million and 30 years of jail time.
It’s best to avoid all this by being honest with your credit card application. If you are struggling to get approved for a credit card, there are better ways to get approved than lying.
Alternatives to lying on a credit card application
Maybe getting a credit card the traditional way isn’t right for you at this time. Don’t worry, there are other, legal and honest, alternatives.
Secured credit cards
Those with low income or low credit scores may have success with a secured credit card. A secured credit card issuer requires collateral and an initial deposit. Often, the initial deposit determines the credit limit. Secured credit cards otherwise work just like a traditional credit card and are a great place to start improving your credit score.
Learn about the best secured credit cards.
Use a cosigner
Just like with a mortgage or lease, a cosigner provides the lender with assurances that it will get repaid. Using a cosigner with a higher income or credit score, such as your spouse, can boost your chances of getting approved for a credit card.
Become an authorized user
If a financially healthy loved one allows it, you can become an authorized user on that person’s account. All your activity will run through that account, but your own credit file will benefit from having access to that line of credit.
Improve your financial status
Sometimes a combination of hard work and patience is the best way to get what you want. There are ways to repair your credit score, increase your income, and improve your situation over time. Once you accomplish this and can get a credit card with integrity, you’ll be so proud of what you have achieved.
Pro tip: Once you do get approved for credit, set up autopay on your credit accounts so that you never miss a payment. Just be sure to always keep enough money in your account to cover the payments.
Name that legislation: The full title of the 2009 Credit CARD Act is Credit Card Accountability Responsibility and Disclosure Act of 2009.
How to apply for a credit card
Getting a credit card is a great way to make purchases and build credit. To get a credit card, you must apply through a credit card company. Credit cards are very useful, but they’re a big responsibility. There are a few requirements you should meet before applying for a credit card.
Choosing the right credit card
There are many types of credit cards out there. Each credit card may come with different rewards, fees, and other terms. Consider your needs and objectives when deciding which one to go with. There are several factors you’ll want to consider when choosing a credit card.
When choosing a credit card, consider:
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Try to choose a card that has the best balance of these terms for your needs. For example, a credit card with great travel rewards is best for those who travel often. If you are a big shopper, getting a store credit card at a store where you shop frequently could be very beneficial. Someone who plans to carry a card balance should look for a credit card with a high credit limit and low interest rate. Every borrower should consider if the rewards of a credit card are worth the associated annual fees.
Use SuperMoney’s credit card comparison tools to find the right credit card issuer for you.
Once you have decided on your credit card, you’ll have to gather the necessary information to apply. Every credit card issuer may set different requirements for its applicants. Visit the website of your desired credit card company for more information.
Credit card application requirements
Not everyone is eligible for a credit card. Credit card issuers want to take on as little risk as possible. For this reason, they won’t issue credit cards to high-risk borrowers. Credit card companies put minimum requirements in place for applicants. They will analyze the financial status of an applicant based on a few metrics.
Typical requirements
Common credit card application requirements include the following:
- Good credit history
- Sufficient annual income
- U.S. or state residency
Let’s take a closer look at each of these.
Good credit history
Most lenders require applicants to present a good credit history to open a new line of credit. Your credit history can also determine the credit limit you’re eligible for once you obtain a credit card. Important aspects of your credit history include the length of that history (how long you’ve been using credit responsibly), new credit, credit mix, payment history, and amounts owed. Your credit score reflects your credit history. A good credit score usually means that you handle borrowed money responsibly. Credit card companies can run a credit report to determine your risk level as a borrower.
Sufficient annual income
Most credit card companies have annual income requirements. You may be asked to present information about your employment status, the employment status and income of your spouse, and any of your assets. You may be asked to provide pay stubs or a tax return to verify income. If you have a high debt-to-income ratio, your application may be denied.
U.S. or state residency
United States residency or state residency is often required to open a credit card account. You will be asked for your address and may need to provide proof. Proof of residency can be a utility bill, lease, or property tax receipt.
In addition to credit card company requirements, you should make sure you are financially stable enough to handle a credit card. If you make late payments or don’t meet the minimum monthly payment, you could face penalty fees, high interest, and a drop in your credit score. Financial experts advise credit card holders to only spend as much as they can pay off right away. In other words, don’t spend more than you make, and make sure you pay your balance in full and on time.
FAQ
What happens if I lie on a credit card application?
If you lie on a credit card application, you’ll likely get caught eventually. It’s a crime that results in consequences ranging from canceling your credit card account to jail time. Best not to risk it.
Can you lie when applying for credit?
You can lie, but you will regret it. Once you’re caught, you may face trial for the federal crime of credit fraud.
Is lying on a credit card application bad?
Lying on a credit card application is legally bad, but it’s also bad for you. Requirements exist for a reason. If you don’t meet them, you might not be ready to take on the responsibility of a credit card, and you could land yourself in even more trouble.
What happens if you lie to the credit bureau?
If you lie to the credit bureau, that is credit fraud, a federal crime with potentially huge consequences including large fines and jail time.
Do credit card companies check your bank account?
Credit card companies can see the balance on your credit card account. They may ask for proof of income and debts to verify that you can pay back what you borrow.
How much do credit card companies know about you?
Credit card companies require personal information such as name, address, Social Security number, and annual income to process applications. They won’t know anything about you that you don’t tell them or authorize them to look up when you apply.
Though reputable companies have robust cybersecurity systems in place to protect your information, high profile data breaches of just such companies may make you hesitant to share all the information a company requires. However, if you refuse to tell them all the information they require to process your application, you won’t be able to open an account with them.
Key takeaways
- When applying for a credit line, you’ll be asked to verify your ability to pay your debts by presenting personal financial data. The better your financial health, the more likely it is that you’ll get approved for a credit card, and the higher the credit limit you can get.
- Lying on a credit card application is wrong, it’s illegal, and it will only hurt your financial situation more. Loan application fraud can cost you up to $1 million in fines and 30 years in jail.
- Instead of lying on a credit card application, apply for a secured credit card, become an authorized user, bring on a cosigner, or work to improve your financial metrics.
Related reading: Have a not-so-great credit score? Check out the top credit repair companies.
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