Application fraud

Lying, or using a false identity, on an application to get something you would not otherwise receive.

The application might be for a credit card, a loan, a bank account, an insurance policy, a rental, or a government benefit, and the false information is what gets it approved.

The submission of false, stolen, or fabricated information on an application in order to obtain credit, a product, a service, or a benefit. An application is any formal request that an organization evaluates before approving, such as for a loan or an account.

Application fraud comes in two broad forms:

• Identity-based fraud, in which the applicant is not who they claim to be. This includes using a stolen identity, a synthetic identity that mixes real and invented details, or a fully fabricated identity.
• Misrepresentation fraud, in which the applicant is who they say they are but lies about facts that affect the decision, such as income, employment, debts, or address.

The fraud shows up wherever an organization decides based on what an applicant says:

1. Credit cards and personal loans, where applicants may inflate income or use someone else's identity.
2. Mortgages and auto loans, where applicants may misstate income, employment, or the purpose of the loan.
3. Bank and fintech accounts, where the application is an account opening.
4. Insurance, where applicants may hide facts that change the price or eligibility.
5. Rentals and employment, where applicants may fake identity, references, or credentials.
6. Government and education programs, where false applications can be used to claim benefits or aid.

Common defenses work at several points in the process:

• Identity checks, such as document verification and a live selfie, confirm who is applying.
• Data checks, such as comparing stated details with records, test whether the facts hold up.
• Income and employment checks, which confirm the claims that drive the decision.
• Duplicate and velocity checks, which catch repeat applications and unusual bursts.

Application fraud sits next to terms that are easy to mix up:

• Account opening fraud is application fraud at the moment an account is created, and the industry also calls it new account fraud.
• First-party fraud is committed by the real applicant, which includes misrepresentation on an application.
• Third-party fraud uses another person's identity, which is one route into an application.

For an education example, see 1 in 3 College Applications Are Fake: How Identity Verification Stops FAFSA Fraud.