Consumers Advised That Credit Applications Must Be Truthful

In a world where credit is increasingly difficult to come by, consumers have been urged to resist the temptation to include falsehoods in applications for cards or loans.

According to David Kuo, head of personal finance at the independent advisory service the Motley Fool, the growing number of people who are lying on their credit card applications are doing to because many more banks are now looking to avoid providing finance to customers perceived to be more of a risk. His comments came in response to a recent study by the UK fraud prevention service Cifas, which found that there has been a 13 per cent increase in the number of people who are making untruthful applications for personal loans, insurance products or credit cards in the first quarter of 2008.

Mr Kuo asserted that while it might be tempting to do so, lying on applications would not benefit consumers in the long run. He suggested that instead people who have been refused credit should comprehensively evaluate their financial situation to establish why the provider identified them as a risky customer to give backing to. He added that every time an inaccurate application is made, the chances of it having a negative effect on personal credit ratings increases, with the possibility of people being denied credit in the future even if their financial situation improves simply because they had made fraudulent claims.

For those who are in need of additional finance in a tightened economic climate but who are finding it difficult to obtain credit, taking out a bad credit loan may be of assistance in providing the economic security necessary to start making regular payments towards household items of expenditure and begin to build credit ratings back up.

In total, there were 21,780 cases of fraudulent applications in the first three months of 2008, up from 19,239 at the end of 2007. The most common offence was failing to include previous address information where credit ratings had been impaired during the resident's tenure. Peter Hurst, Cifas chief executive, said that many people felt the need to lie because the credit crunch had made obtaining financial backing more difficult.

To help people plan their finances more effectively, Mr Kuo advises setting a budget to limit spending. He added that if outgoings are greater than income then people really need to look to make savings as personal loans and credit cards become more difficult to obtain. Mortgage costs, fuel, food and transport bills were identified as key action areas for those looking to limit their monthly outgoings. For those who are struggling to manage their mortgage contributions, the Motley Fool boss advised customers to talk to their provider to see whether the term of the mortgage could be extended in order to ease the strain of monthly contributions.

"It's not going to help you over the long term, because you will end up paying more, but at least in the short term it will reduce your monthly outgoings and just make life a little bit easier for you until you get over the problem and then you can go back to your mortgage provider again," he suggested.

His comments follow recent findings from price comparison service uSwitch noting a 1.7 per cent increase in insolvency figures in the first three months of the year. Statistics suggest that as many 104,000 people could become insolvent over the course of the year.