18,000 credit card rejections a day

05 May 2008

Credit crunch forces lenders to tighten acceptance criteria

According to a new survey, banks are rejecting as many as 18,000 credit card applications each day as they try to reduce their exposure to debt.

The recent credit crunch has forced lenders to tighten the acceptance criteria for new customers.

This has resulted in 3.24m credit card applications being rejected in the last six months –equal to 18,000 a day.

Some companies are rejecting as many as half of all credit card applicants as they try to protect themselves from those people who are likely to default on their debts.

Other credit card companies are reducing the credit limits they give to successful applicants and increasing interest rates and charges applied to funds borrowed on their cards.

The survey, which was conducted by Money Expert, found that one in 14 people (seven per cent of adults) have had their application for a credit card rejected in the last six months.

When you apply for a credit card, the lender will check your credit report and formulate a credit score based on your previous behaviour with credit facilities. The acceptance threshold is higher in light of the credit crunch.

County Court Judgements (CCJs) or even something as minor as missing a payment on a phone bill could considerably reduce your credit score and hinder your chances of being given a credit card.

A rejection for credit can also be seen as a risk factor by some companies and can further decrease your chances of getting a credit facility like a credit card.

Sean Gardner, of Money Expert, said: “For years, borrowers have had the upper hand in the credit card game but the rules have changed.

“Given the turmoil in the mortgage markets, the options are running out for people with problem debts.

“They need to take control of their borrowing and crucially to reduce their debts,” he added.

If you have been rejected, you would probably benefit from checking your credit report and first fixing any problem areas before trying to apply for further credit.

If you wish to apply for a credit card, you would also probably benefit from first checking your credit report and optimising your credit report to give yourself the best chance of acceptance from lenders.

Our guide on ‘How to improve your credit rating’ will guide you through what a credit report is and how to fix common problem areas.

If you have a flawless credit report, the best thing you can do is compare top credit cards to make sure you get the best APR and 0% interest credit card offers.

Get your free Experian credit report here.