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I was browsing reddit the other day and I saw this comment:
Because I've got like an 810 credit rating now, I should apply for everything I can on the same day, get approved for as many as I can, buy up everything I need, and then tell them to go to hell.
Other than the obvious drawback of not being able to apply for a loan for the next 7 years, are there any other reasons not to do this?
I am not planning to do this, I just saw the comment am curious.
Well, primarily because that's fraud and fraud prevents a debtor from receiving a discharge in bankruptcy court. Fraud would be pretty easy to prove if you didn't have an income change and you have several lines of credit opened on and around the same day with almost no payments made toward them. Additionally, thanks to the reforms of the bankruptcy code, if your income exceeds the median income of your state you'll be forced in to a Chapter 13 and committed to a repayment plan that allocates all of your "disposable income" to your creditors.
Now if whoever posted that will attempt to simply not pay then negotiate repayment plans with their creditors the process will last far longer than 7 years. It takes a long time to be in default for enough time that a consumer creditor will negotiate the debt and this is assuming the creditor doesn't sue you and get a judgement which could apply liens to any property you may own. The judgment(s) will likely cause you to pursue bankruptcy anyway; only now you're at least a few years beyond the point at which you ruined your credit.
It may become difficult to rent a car or a hotel room.
It may affect your ability to get a job. Some employers now check credit reports and disqualify candidates with a poor credit report.
It may affect your ability to get a security clearance or professional bonding.
It may affect your ability to find housing. Many landlords check credit reports.
You may be harassed morning, noon, and night by collection agencies. This can be theoretically solved by declaring bankruptcy, but the bankruptcy court may force the sale of some of your assets to make payments towards your debt.
I should apply for everything I can on the same day, get approved for as many as I can
First it may not sound as easy. You may hardly get 2-3 cards and not dozens. Even if you submit the applications the same day;
If you still plan this and somehow get too many cards, and draw huge debt, then the Banks can take this seriously and file court case. If Banks are able to establish the intent; this can get constituted as fraud and liable for criminal proceedings.
So in short if someone has the money and don't want to pay; the court can attach the wage or other assets and make the person pay. If the intent was fraud one can even be sent to jail.
The U.S. bankruptcy laws no longer make it simple to discharge credit card debt, so you can't simply run up a massive tab on credit cards and then just walk away from them anymore. That used to be the case, but that particular loophole no longer exists the way it once did.
Further, you could face fraud charges if it can be proven you acted deliberately with the intent to commit fraud.
Finally, you won't be able to rack up a ton of new cards as quickly as you might think, so your ability to amass enough to make your plan worth the risk is not as great as you seem to believe.
As a closing note, don't do it. All you do is make it more expensive for the rest of us to carry credit cards. After all, the banks aren't going to eat the losses. They'll just pass them along in the form of higher fees and rates to the rest of us.
