What Happens If You Lie About Your Income on a Credit Card Application?

When you apply for a credit card, the card issuer will ask you to fill out a form that asks a number of questions.

Most card issuers will also ask you to provide information about your income.

You might have to tell the card issuer what your career is and how much you make in a year.

You may be tempted to lie on your credit card application, stating an income that is higher than what you really make.

This is a bad idea.

At best, you could have your credit card account closed if the lender finds out.

At worst, you could wind up paying big fines or spending time in jail.

You Could Be Tried and Convicted of Fraud

An application for a credit card, or any kind of loan, is a legal document.

When you submit the application, whether it be in-person or online, you must affirm that all of the information on the application is true.

If you knowingly lie on a credit card application, you are committing a crime known as loan application fraud.

Here's the deal:

Loan application fraud is a serious crime that carries hefty penalties.

If you are convicted of the crime, you can face up to $1 million in fines and thirty (30) years of jail time.

There are many examples of people who have been convicted of loan application fraud.

  • In 2015, Solomon Gordon Raymond of San Diego was sentenced to nearly five years in prison and ordered to pay $729,192 for committing loan application fraud.
  • Also in 2015, a woman from Raleigh, North Carolina was sentenced to five years in prison for loan application fraud.
  • In 2014, an Ohio woman was sentenced to fourteen years in prison and to pay $73,554 for her role in loan application fraud.

Though you might think that loan application fraud is very rare, it’s actually surprisingly common.

Online lender Prosper estimates that 11% of the loans it selects for verification include incomplete or falsified information.

Not surprisingly:

The applications are rejected immediately.

Another online lender, Lending Club, states that it will demand immediate repayment, in full, if it finds that a borrower lied on their application.

Can Card Issuers Really Find Out?

Credit cards are big business.

As many as 43 percent of Americans apply for a credit card every year, which means card issuers receive hundreds of thousands of applications every day.

Can they really tell if you lie on your application?

The truth is:

Usually, they can tell.

Card issuers receive far too many applications to be able to get each one so carefully.

Generally, you’ll only be required to provide proof of your income when you apply for a huge loan, like a mortgage.

Still, it’s a bad idea to lie on a credit card application, even if the odds of getting caught are low.

Random income inquiries

Many card issuers will ask random applicants to provide proof of their income during the application process.

American Express has become known to run financial reviews on customers who set off certain red flags, locking accounts until the cardholder provides proof of income and other documentation.

Even if you can get away with it, the penalties for getting caught are so strict, and the benefit so small, that it isn’t worth it.

Getting caught in bankruptcy

The most common way of getting caught committing loan application fraud is by...

Declaring bankruptcy.

If you get a credit limit you can’t handle, fall deep into debt, and are unable to pay your loans back, you might have to file for bankruptcy.

It’s at this point that your lenders will come after you to find out why you were unable to pay back a loan they approved.

You’ll be forced to provide documentation surrounding your income, assets, and debts in the lead up to your bankruptcy.

If fraud is discovered, you’ll wind up in even worse trouble.

Setting Yourself Up for Failure

Another reason that you don’t want to lie on a credit card application, beyond the simple fact that doing so is illegal, is that lying on the application is like setting yourself up for failure.

You may be tempted to lie because you don’t think you’ll get approved for a credit card.

You might also lie because you want to get a higher credit limit.

In either case, you might be hurting yourself more than you’re helping.

More credit than you can handle

Here's the deal:

Lenders have incredibly well-tuned application review systems.

They can estimate exactly how large a credit limit you can manage, and the odds that you’ll pay back your debts.

Given the lenders’ experience with lending, they probably have a better idea of how large a loan you can handle than you do.

If you lie on an application and wind up with a credit line that is larger than you can manage on your true income, you’re far more likely to fall into debt.

Worse:

You might be entirely unable to pay your way out of that debt.

The credit limit that the lender gives you limits your risk in the same way it limits the lender’s risk.

Getting a higher credit limit simply increases the amount of debt you can get into.

Use a Secured Credit Card Instead

If you’re tempted to lie on a credit card application because you worry that you won’t qualify for a card, there are other options available.

Don’t resort to fraud when there are legal alternatives available.

One good option for people with poor or no credit is to apply for a secured credit card.

Secured credit cards are easy to qualify for because lenders take on far less risk when they approve them.

The benefit for consumers is that they work just like regular credit cards and can help you start building your credit score.

When you are approved for a secured credit card, you’ll have to provide some form of collateral to the lender.

This collateral secured the loan that the card issuer is giving you.

This collateral is usually in the form of cash and the credit limit you receive is usually equal to the size of your security deposit.

For example, you may apply for a secured credit card from your bank.

The bank may require that you open a new savings account and deposit $300 to it.

Once you do, the bank will give you a credit card with a $300 limit.

Like other credit cards

You can use the secured credit card like you would any other card.

You’ll get a bill each month that you should pay in full, though you can carry a balance if you need to.

You should always pay at least the minimum monthly payment.

If you ever fail to make a payment, the card issuer will take your security deposit.

In this way, the card issuer effectively takes on no risk, because the issuer can take your entire deposit if you max out the card and don’t pay.

Missing a payment will also hurt your credit score.

If you make your monthly payments, your credit score will slowly improve. Once you’ve shown that you can be trusted with a credit card, the lender may upgrade you to an unsecured card.

You’ll get your collateral back and can continue using the card.

Upgraded to unsecured

Alternatively, you can close the account and use your improved credit score to open a new, unsecured card with a different lender.

There’s a huge variety of secured credit cards on the market, so take the time to shop around for the best one.

Some charge hefty annual fees while others don’t. Some give you the opportunity to earn cash back while others have no rewards at all.

There are secured cards with low APRs, no balance transfer fees, and early any other feature you could need.

They’re a great tool for people who want to rebuild their credit but have trouble qualifying for a card.

Conclusion

The truth is that it’s incredibly unlikely that a lender will ever find out that you’ve lied on a credit card application.

Still, you should never do so, because it is a major crime that carries significant fines and jail time.

There are legal alternatives that you can use to build your credit.

They will also help you build good credit habits so that you can properly handle larger credit lines once you are able to qualify for them.

Related Articles

Are Credit Card Balance Transfers a Good Idea?
APY vs. APR: What's the Difference?
What Happens When You Don't Use Your Credit Card?
Charge Card vs. Credit Card: The Differences
What's the Difference Between a Balance Transfer and a Cash Advance?
How to Opt Out of Pre-Approved Credit Card Offers

Ask a Question