For most people, the current economic slowdown is reason to take stock of all their outgoings and financial commitments and look into cutting a few corners until times get a little less tough.

Over the past six years alone, the share of household income spent on food, bills and other such unavoidable costs has risen from 25 per cent to 31 per cent, a new report from Capital Economics has revealed, while it is widely expected that more than a million homeowners will see a significant increase in their mortgage repayment commitments as lenders fail to pass on interest rate cuts to their customers.

To make matters worse, just as prices go up for the average consumer, so too are banks and other financial institutions becoming steadily more strict about who they lend to and how much they are willing to lend, leaving many people struggling without the easy credit they have become accustomed to over the past decade.

Again, many people have taken this in their stride and simply cut up their credit cards, acknowledging that the days of 'buy now, pay later', are well and truly over and need to be replaced with a period of prudence.

However, a significant number of people will still attempt to borrow, either out of genuine necessity or just a desire to maintain a lifestyle they have grown used to, and this in turn has led to a marked increase in credit application fraud.

According to new research from the UK's fraud prevention service Cifas, the number of people lying on applications for credit has gone up by 13 per cent over the first three months of 2008.

The most common lie remains the deliberate failure to disclose a previous address where an applicant's credit history may have been impaired, while inaccurate levels of savings and false salaries are also frequently put forward by consumers looking to improve their chances in the credit market.

Though this may often seem to consumers as nothing more than telling a white lie in order to get financially stable again, experts have warned that such a tactic is not likely to do a prospective borrower any favours and may actually prove to be harmful in the long-run.

James Taylor, head of personal finance here at UKNetGuide, explained: "Lying on your credit application doesn't help you because what will happen is you will be turned down for your credit card and that again will start to impact your personal credit profile.

"The more fraudulent applications that you put in, the more time you are going to be turned down; to such an extent that even when you may apply for a line of credit, and you should theoretically be allowed to have that line of credit, you could find yourself being turned down because you've had so many black marks against your personal credit profile already."


Far better, therefore, to attempt to be honest, even if this does necessitate an awkward and humiliating meeting with the bank manager.

With the state of the economy likely to get worse before it gets any better, honesty really is the best policy when it comes to money matters.