Lying on a credit card application
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Credit can buy you many things in life, but qualifying for that credit when applying for a new credit card is a different story. Your income and credit history are factors that determine how much credit you can receive from a lender, and sometimes, financial wants don’t match up with reality.
It can be tempting to stretch the truth when you fill out a credit card application so you can acquire a better home, a newer car or a bigger loan, for example, but lying on your credit card application can have serious consequences.
How a credit card application works
When you apply for a credit card, the lender will ask you to complete a form that includes your personal and financial information. This provides the lender with a full financial snapshot of your current and past credit history, so it can determine what kind of additional financial burden you can handle with your new credit card.
Before approving your application, lenders will consider details like:
- Your income
- How much you pay in rent or mortgage
- Your employment status
- Your debt-to-income ratio
Based on these details, the bank can evaluate your financial standing and determine how likely you are to repay what you borrow.
Lying on a credit card application
A credit agreement is a legally binding document, regardless if it is completed online, in-person or over the phone. When you apply, you must attest that the information you provide is correct. If it is not, you could face serious penalties.
When you add false information to a credit card application, you are committing a form of credit fraud. It is a federal crime that can carry serious repercussions, such as the following penalties:
- You could be unable to file bankruptcy or charge off debts
- You could receive criminal charges, punishable by fines of up to $1 million and a maximum of 30 years in jail
Your lender may assess its own penalties, as well. For example, Lending Club demands that you repay the loan in full immediately.
Will lenders check my information?
Not all banks will take the time to check your credit score and confirm your application details.
Same-day loans, for instance, don’t have the time to invest in in-depth investigations. Many of these lenders don’t even perform a hard credit check, opting instead for a soft pull (if any at all). It can be easy for false information to slip through the cracks. Lenders generally only pull credit information when they are dealing with larger loan requests.
Like anything else in life, the larger your lie, the greater the likelihood you’ll be caught.
The digital age has also made the screening process much smarter and more efficient. Today’s latest banking software carries built-in features that can detect irregularities in client data and flag the application for follow up.
If you are unable to repay your debts, you may have no other choice than to file bankruptcy. Bankruptcy can be a major red flag for lenders who want to know why you can’t meet the terms of repayment. Lenders will likely launch an investigation, and you could be required to submit detailed financial data, including your proof of income. That proof of income will directly refute the false information you provided on your credit application and provide all of the evidence needed for legal charges.
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 provides better protections for lenders by clarifying the parameters regarding credit card applications and the disclosure of personal data. This legislation puts added pressure and responsibility for banks to procure the correct kind of detailed information from their customers before they hit the approval button.
It also means that your bank can come to you at any point over the life of the account and ask for updated proof of income as part of your annual credit review.
Alternatives to lying on a credit card application
Before you lie on your application, you should consider these other options that are both legal and effective.
Use a cosigner
Some credit card companies will let you include your spouse’s information on your application. This will increase your total income and could make the difference between an approval or a denial.
Become an authorized user on someone else’s account
You can also choose another trusted party who has a good credit score and doesn’t mind adding you as an authorized user.
Apply for a secured credit card
A secured credit card offers a higher approval rate because it uses collateral to ensure that you don’t bite off more than you can chew. If you apply for a secured credit card, you may owe an initial deposit that doubles as your credit limit. You then use your credit card and make your monthly payments like normal.
Line of credit
Instead of a credit card with a high credit limit, you could instead explore a revolving line of credit. This is a continuous cycle of credit that you can reuse as you pay it off, so you never become buried in debt you can’t repay.
Home equity line of credit (HELOC)
If you own your own home, you could tap into the existing equity to get yourself the credit that you need. A home equity line of credit is similar to a line of credit, but it uses your home as collateral.
The bottom line
It is never okay to lie on a credit card application; you may not get caught, but the consequences could be severe if you are. The reason why credit card companies institute certain limits is so that you don’t take on more debt than you can handle.
Even if you can’t get exactly what you want, there are plenty of ways to improve your credit so you can get the things you need at rates you can afford. Be sure to make all of your credit card and loan payments on time, and try to work on your debt-to-income ratio so your application is more attractive to potential creditors.
If you don’t qualify for the credit card that you want, remember that you still have plenty of options.