Overstating income on a credit application is not only fraudulent, buyers who do this can end up with a car payment they cannot afford
Income and Credit Repair
As we've stated before, filling out an auto loan application is not the time to begin a career in "creative writing" and accuracy is especially important for buyers with bad credit. Lenders not only use income to qualify buyers for a loan, they also used it to compute a debt-to-income ratio as well as determine the maximum monthly payment amount.
However if a dealer falsifies income on an application is also considered fraud and can result in a finance contract being denied by the lender and returned to the dealer. So if all this is true, why would it happen at all?
How to Avoid Unscrupulous Finance Deals
According to the Federal Trade Commission (FTC), "there have been reports that some dealers inflate ... income information for the financing without (the borrower's) knowledge."
Doing this accomplishes at least three things:
- Everything else being equal, a higher income will make it easier to get a credit approval.
- A higher income can offset a larger amount of debt.
- More income means a larger selection of vehicles and a higher monthly payment threshold
So if a dealer overstates a borrower's income, that person could end up with a car payment that she or he cannot afford.
Tips from the FTC
The FTC has a few tips to help borrowers avoid this trap:
- Consider other financing options before visiting a dealer as it might be possible to arrange financing directly with a bank, credit union or finance company. This also allows borrowers to compare what the dealer offers them (a higher borrowing limit could signal that the deal is based on inaccurate income information).
- Research the dealer online and with the state Attorney General for complaint-related issues. Also ask family and friends for recommendations
- Ask to see the credit application – completely filled out – before you sign it, making sure all the information is accurate
- In the words of the FTC, "If a dealer encourages you to overstate your income, take it as a sign that the dealer is not reputable, and leave the dealership."
- Get a copy of all the paperwork before leaving the dealership.
The Bottom Line
Be especially careful when filling out a credit application, making sure all the information entered – especially income – is accurate. If a dealer advises overstating income, the best thing to do is to walk away from the deal and the dealer. Low income car loans are possible, so you shouldn't need to lie in order to find financing.
One more tip: Auto Credit Express matches consumers with car credit issues to dealers that can offer them their best chances for car loan approvals.
So if you're ready to establish your auto credit, you can begin now by filling out our online car loan application.