One third of credit applications rejected
1st June 2011
Over the course of the last year, one third of credit card applications have been rejected due to poor credit. Due to the bad financial climate, lenders have had to tighten their lending criteria and that has caused problems for those with poor credit. Even credit cards that have been designed for people with poor credit are now harder to get accepted for than they were a few years ago.“
Equifax carried out the study that showed that a third of the people who were rejected didn’t know why. The reason is that banks in particular are pickier about who they lend to. Speaking about this, Neil Munroe from Equifax states:
“The credit-card market is still relatively subdued as lenders remain cautious about who they extend new credit to. So it’s vital consumers understand what information is used by credit-card companies to assess their credit-worthiness, as well as how they can ensure their credit rating is at its best for them to get the most favourable rate”
While it is becoming more difficult for people to be accepted for credit cards for bad credit, there are still some which are charging a fortune for the privilege. Experts are warning consumers not to fall into the bad credit trap.
Moneysupermarket.com has recently carried out research that shows the importance of a good credit rating. When applying for credit cards, those with good credit are likely to be accepted for cards such as the Barclaycard Platinum credit card. This gives you 20 months free interest on all balance transfers. If you had spent £1,000 on the card then you would pay around £33.30 interest in a period of 2 years. On the other hand, if you have bad credit you could end up paying potentially thousands of pounds extra.
If you do have bad credit then your choice of credit cards is limited. However you will find that the ones that you can apply for are cards such as the Vanquis credit card. This gives you 39.9% APR. If you had a total of £1,000 to repay on this card you would end up paying around £632.29 over the course of two years. That is a huge increase of £598.49 in comparison to if you had good credit.
The head of banking at Moneysupermarket.com, Kevin Mountford, states:
“It will come as no surprise to many people that the difference between good and poor credit history can add up to hundreds and sometimes thousands of pounds in additional interest. It is therefore vital that consumers understand their credit profile before applying for a new credit card or loan, because getting rejected could damage their profile further, making it harder to secure credit in the future.”
The best option is to choose a company that offers a credit building card. Rather than opting for the high interest bad credit cards, these builder varieties will help you to improve your credit rating without getting into further trouble. Once you are accepted for a bad credit card there is always the temptation there to get into further debt.