Bust out fraud is a form of financial fraud orchestrated over a longer timeline. An individual establishes a strong credit profile, often over months or even years, with the intention of eventually maxing out the lines of credit extended to that profile and not repaying them. Frequently, bust out fraud involves stolen or synthetic identities and is designed to evade early detection. Bust out activity can result in significant financial exposure for institutions, as this type of fraud is often only uncovered after losses are fully realized, as the fraudster took care to establish an account history without any red flags.
Use case/ examples of bust out fraud
Credit card bust out: Building credit over time on multiple credit cards, often using a synthetic or stolen identity, before rapidly maxing out the cards with no intention of repaying. For example, a fraudster might open multiple credit lines with a synthetic identity and maintain a positive account history so that the card limits are increased, then make large purchases or cash advances against the cards and abandon the accounts.
Loan bust out: Taking out loans using synthetic or compromised identities, withdrawing the full amount, and immediately defaulting on the loan. These could be personal or business loans, which the fraudster rapidly draws down and never repays."
