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Lending without income proof remains risky

18/06/2008

Credit card companies are putting themselves and consumers at risk by not asking for proof of income on applications.

In the past 12 months, according to a survey from uSwitch.com, 84 per cent of successful credit card applicants – 4.8 million individuals – were not asked to provide any proof of income to support the figures stated in their application form.

This means those who are less than honest about their income could be accessing £17 billion of credit they cannot afford, uSwitch.com said.

Simeon Linstead, head of personal finance at uSwitch.com, said: "We cannot ignore the fact the credit crunch has forced lenders to tighten their belts and reject applications that may lead to further write-offs.

"The fact remains that just because a consumer appears to have a 'suitable' credit score, it doesn't mean they are always honest about their income and actually have the cash available each month to pay the bill.

"The credit squeeze will back some consumers into a corner and, in sheer desperation, people will resort to lying about their salaries as this is such an easy loophole to exploit."

In a survey, uSwitch found five per cent lied about their salary when applying for a credit card, adding up to an additional 70 per cent onto their actual income and securing over £693 million worth of credit.

In addition, 77 per cent of those surveyed (4.4 million) did not get their credit card from their own bank, meaning the lender would have had little or no existing information on the applicant's credit worthiness

"We cannot ignore the fact that consumers have a responsibility to borrow sensibly, but lenders need to help the process and tighten their credit checking procedures," Mr Linstead concluded.