What is Bust-Out Fraud?Taking Credit Limits to the Max
What is Bust-Out Fraud? How do Bust-Out Scams Work?
Maxing out a credit card is fairly normal.
Data from the Federal Reserve’s Quarterly Report on Household Debt and Credit, as reported by CNBC, showed that approximately 40% of Americans had “maxed out or come close to maxing out a credit card.”
However, what’s far from normal — and outright fraudulent — is using deceptive means to open credit cards. It’s even worse when a scammer maxes out a card while having no intention of ever repaying the debt.
In this first chapter, let’s take a look at how this type of scam, commonly called “bust-out fraud,” actually works.
Bust-Out Fraud
Scammers often look like legitimate cardholders... at least until they suddenly don’t. Take bust-out fraud, for instance. This happens when a scammer uses a synthetic identity to open up credit cards with issuing banks, build up a credit history, then max out the card and disappear.
What is Bust-Out Fraud?
- Bust-Out Fraud
Bust-out fraud is a practice by which a fraudster acquires a credit card account using false information, then leverages that account to develop an extended line of credit. When the available credit is high enough, the fraudster maxes out the cards and walks away without paying, effectively “busting out” of the scam.
[noun]/bəst • out • frôd/
Unlike other transaction fraud tactics, bust-out credit card fraud is a game of patience. Like the proverbial golden goose, trying to get too much too fast will usually backfire. In most cases, the longer the fraudster nurtures a fake account, the higher the payoff will be.
While the details will vary, these ploys follow the same basic pattern. First, a fraudster gains access to a consumer’s Social Security number. That information is used to create a fake persona and open a credit card account.
Rather than immediately maxing out that card, however, the bogus customer works to establish a strong and reputable credit profile by mimicking the behavior of a real cardholder. The fraudster makes purchases and pays the bills on time, sometimes for months or even years.
At some point, though, the fraudster will “bust out.” They max out the cards, charge all the credit accounts to their limit and withdraw as much cash as possible. Then, they vanish. This chart illustrates the general process of the credit bust-out scheme.
What’s the Aim of a Bust-Out Scam?
Bust-out fraud involves building a strong payment history to unlock higher credit limits and new accounts, often leaving victims with large amounts of debt they never authorized. Because schemes can take months or years, they’re now typically carried out by organized criminal rings rather than individuals.
The idea is to gradually build a strong payment history, which can lead to higher credit limits and make it easier to open other accounts. The consumer whose SSN is being used could end up with tens of thousands of dollars in available credit that they don’t even know about. It all depends on how long the fraudster maintains the scheme.
While it can yield a substantial payoff, a single bust-out could take months or years to come to fruition. That’s why it’s increasingly rare for such fraud to be the work of one individual. These days, large criminal rings employ multiple people to set as many plans in motion as possible.
