That would probably be prosecuted as perjury instead of fraud, but it’s a felony regardless. Fraud generally requires an element of actual or attempted pecuniary gain, and understating income would likely make that element difficult to prove. However, perjury covers any false statement made under penalty of perjury (which many credit applications are). It could be prosecuted as fraud if you attempted to use the understated income in order to avoid/minimize collection activity or negotiate a favorable write-down of a debt etc.