First-party fraud in credit reports: challenges, remedies, and the path forward in Europe
As AI makes credit report forgery easier, Europe must move beyond PDFs to protect trust in cross-border lending.
Forgery and manipulation of credit reports have long posed serious challenges across multiple countries, undermining the integrity of credit systems and financial markets. First-party fraud – where legitimate consumers themselves falsify or manipulate official documents to boost creditworthiness – has become a growing concern, especially amid tightening credit conditions and the increasing digitization of financial services.
Recent evidence shows that this problem is escalating in severity and sophistication, fuelled by advances in technology such as AI-generated fake documents. For companies like Mifundo, and policymakers across Europe, addressing this evolving threat is crucial to protecting consumer trust, safeguarding lenders, and maintaining a resilient financial ecosystem.
The growing scale and sophistication of first-party fraud
Mortgage fraud is a stark example. In the UK, cases surged 32.8% between 2022 and 2023, with industry experts warning that much of this fraud "is going largely undetected." Tactics include forged paperwork, fabricated identities, and income misrepresentation designed to deceive lenders and bypass checks.
Cifas, the UK’s fraud prevention association, recently reported that 1 in 6 UK adults admit to either personally misleading mortgage companies about their income or knowing someone who has done so. Fabricated payslips and inflated earnings are now common tools for securing home ownership dishonestly.
The rental market is not immune. In the Paris region, nearly 23% of rental applications were found to contain fraudulent documents, often including manipulated credit reports. Such trends are symptomatic of broader economic pressures on housing markets and the rising stakes for consumers trying to secure living arrangements.
Technological advances and the new fraud landscape
The tools used for credit report manipulation have evolved dramatically. From simple PDF edits and image-based forgery, fraudsters now leverage AI-powered document generators capable of producing near-perfect counterfeit credit reports. These forged reports replicate genuine documents’ appearance and metadata, complicating detection efforts significantly. Studies show a staggering 244% year-over-year increase in digital document forgeries in 2024 alone – a 1,600% surge since 2021.
Worryingly, some public credit registers have inadvertently facilitated this by making template documents publicly accessible online.
Why first-party fraud in credit reports matters at the European level
The repercussions extend far beyond individual lenders or consumers. Credit report forgery threatens the confidence upon which the entire credit ecosystem depends, including private credit reference agencies and public credit registers – often maintained by national central banks.
The challenge intensifies when forged credit reports cross borders. For European consumers seeking credit abroad, foreign lenders have to rely on documents shared by applicants but often lack direct, secure access to domestic credit private and /or public databases. Without real-time, verifiable data, lenders face risks of accepting outdated, tampered, or fabricated reports. This not only jeopardizes lending decisions but may also expose creditors to regulatory breaches under EU Anti-Money Laundering (AML) and Know Your Customer (KYC) directives.
The alternative is to automatically decline credit to a foreign applicant based on their nationality or foreign status, which cannot be a solution either.
The way forward
Forgery of financial documents, including credit reports, is criminalized throughout Europe, with severe penalties including fines and imprisonment. However, enforcement alone is insufficient given the rapid innovation in forgery techniques – particularly those leveraging AI.
At the EU level, several converging regulatory initiatives (DORA, E-IDAs) emphasize the need for secure, interoperable digital infrastructures and robust identity verification frameworks. To align with these priorities, credit databases (both private and, specially, public ones) should implement secure, cross-border APIs that allow foreign creditors to seamlessly access available credit data. This will dramatically reduce reliance on easily manipulated paper or PDF documents.
Mifundo’s role: bridging technology, policy, and trust
At Mifundo, we believe that combatting first-party fraud requires a coordinated, technology-enabled approach. Our platform facilitates secure, privacy-compliant cross-border credit data exchange that empower creditors with reliable, up-to-date information.
Partnerships between credit bureaus, central banks, fintech innovators, and regulators are essential to building a resilient European credit ecosystem. Together, leveraging technology and international collaboration, we can safeguard financial systems and maintain consumer trust in an increasingly digital and interconnected world.
