The Rising Threat of Fake Employment Verification for Loans

We’ve all been tempted to exaggerate a bit on a resume or tell a little white lie on a loan application. But fake employment verification takes things to a whole new level. Providing false information about your job history or income to try to get approved for a loan is fraud, plain and simple. And it’s a growing problem that both borrowers and lenders need to watch out for.

In this article, I’ll break down exactly what fake employment verification for loans is, why people do it, and how they fake job and income information. I’ll also discuss the major risks and repercussions. Finally, I’ll provide tips for both borrowers and lenders on how to detect and prevent this type of fraud.

What is Fake Employment Verification for Loans?

Fake employment verification involves providing false information about your employment status, income, job history, title, or duties to try to get approved for a personal loan, mortgage, auto loan, or other types of credit.

Common ways borrowers fake employment details include:

• Claiming a higher job title than they really have
• Lying about their length of employment or job duties
• Providing fake paystubs, tax documents, or bank statements showing inflated income
• Making up previous employers or positions they never held
• Getting friends to pose as past managers and provide false references

Some even go so far as to create elaborate fake companies or pay for services that provide bogus employment verification.

Why Do People Fake Employment Information for Loans?

There are a few key motivations behind providing false employment details on a loan application

• To qualify for a larger loan amount – Lenders base approval amounts on your income. Faking higher earnings allows borrowers to get approved for more money

• To get approved with poor or insufficient credit – Those with low credit scores or a history of late payments may fake employment to override bad credit reports.

• To get a loan they otherwise wouldn’t qualify for – Those who are unemployed, have gaps in employment, or don’t meet minimum requirements lie to get approved.

• To get lower interest rates – Some lenders offer better rates to borrowers with stable jobs and higher salaries, tempting applicants to fabricate their employment.

While the exact reasons vary, it boils down to wanting access to more credit than the applicant actually qualifies for based on their real current employment situation.

How Do People Fake Employment for Loans?

Job and income falsification used to require some Photoshop skills. But today there are easier ways for nearly anyone to generate convincing fake employment verification documents. Common techniques include:

• Fake pay stub generators – There are websites that allow you to plug in your own info to generate fake pay stubs complete with company logos,

• Fictitious employers – Applicants provide made up business names and contact info on applications. Some fake employers even show up in online directories.

• Doctored tax documents – Services exist to edit real W-2s and tax returns to inflate income figures.

• False references – Applicants provide contacts pretending to be past managers who will lie about your employment history.

• Bogus verification services – Some companies advertise employment verification services but provide false information for a fee.

With digitally altered documents and fake online footprints, it’s getting much harder to detect false employment claims just by traditional application screening methods.

The Risks and Repercussions of Faking Employment

Providing false employment information on a loan application seems like an easy shortcut to get approved, but it comes with serious risks and consequences, including:

• Loan default – Without the income borrowed assumed, applicants often end up defaulting on loans obtained through fraudulent means.

• Civil lawsuits – Lenders can sue borrowers who falsify employment leading to financial losses for the lender.

• Criminal charges – Fake employment verification for loans falls under federal loan fraud laws. Borrowers may face fines up to $1 million and imprisonment up to 30 years.

• Credit damage – Loan defaults stay on your credit history for 7-10 years damaging your ability to get approved for future credit.

• Lose collateral – With defaulted loans, lenders can seize the home, car or other assets put up as collateral.

• Tax fraud – Lying about income can constitute tax fraud if false earnings are reported to the IRS. This adds potential IRS fines and audits.

While it may increase short term chances of approval, fake employment verification often backfires, hurting the borrower’s finances and credit long term when the fraud is uncovered.

How Lenders Can Detect Potential Fake Employment

Lenders have a responsibility to vet employment details and watch for any red flags that point to fabricated job or income claims. Here are some tips for spotting potential false information:

• Verify recent pay stubs – Check that pay stub dates align with the claimed start date and salary. Make sure taxes and deductions are logical.

• Look for document manipulation – Inspect pay stubs, tax forms, and bank statements closely for any signs of alteration including font/format inconsistencies.

• Watch for rounded or repetitive figures– Income and deductions that are rounded or too clean could indicate fake pay stubs.

• Call to confirm employment – Speak with the applicant’s employer directly to verify employment dates, income, and title.

• Check online traces – Search for websites and social media pages of companies and managers provided to confirm they match the claimed employment history.

• Third party verification – Services like The Work Number from Equifax can provide automated employment verification by accessing payroll data.

• Follow up on red flags – Any inconsistencies, missing documents, or gaps in the employment history merit further investigation.

While due diligence takes time and resources, it’s the only way for lenders to reduce financial risks and prevent fraud.

How Applicants Can Avoid the Need to Fake Employment

Job loss or income reductions happen. But falsifying your situation is never the solution. Here are alternative steps borrowers can take to qualify for credit without resorting to fraud:

• Wait – Delay major loans until you have at least 6 months of steady income from a new job to show lenders.

• Build your credit – Good credit scores can help compensate for short job tenure. Pay all bills on time and keep credit card balances low.

• Bring a cosigner – Add a cosigner with higher income and solid credit to strengthen the application.

• Explore alternate lenders – Online lenders tend to offer more flexibility for those with short credit histories or recent job changes.

• Talk to lenders – If you lost a job, explain the situation to lenders. Some may approve smaller amounts to start or suggest credit builder loans.

• Consider other options – If unable to quality for installment credit, explore payday loans or lending circle loans to build up your ability to borrow.

Taking honest steps now preserves your trustworthiness with lenders and protects your finances in the future.

The Bottom Line

Fake employment verification allows unqualified borrowers to access loans and credit they can’t afford. But in the long run, it damages credit, hinders future borrowing, and can carry severe legal consequences. Both lenders and applicants should understand how to recognize falsified employment details as well as make use of legitimate alternatives to verify income and qualifications. Steering clear of job and income fraud protects all parties from the fallout of defaults and fraud-related losses.