Millions of people who have applied for a credit card or personal loan during the past six months have been rejected by lenders under increasing pressure from the credit crisis.
Around 13 per cent of people who applied for a financial product in the six months to the middle of September had a credit card application turned down, while a further 6 per cent had one for a loan rejected, according to MoneyExpert.com.
The group estimates that a total of 3.27m credit card applications and 1.56m loan applications have been refused by lenders during the period, the equivalent of 27,000 rejections a day.
People whose applications are being approved are also having to pay higher rates than they were being charged 18 months ago.
The average interest rate charged on credit cards on an APR basis is now 17.46 per cent up from 16.77 per cent in March last year, while the average rate on a £5,000 personal loan has nearly doubled from 8.6 per cent to 15.3 per cent now.
The research found that people aged between 25 and 34 were most likely to have had an application for credit turned down during the past six months, with 21 per cent of applicants in this age group being rejected for credit cards and 10 per cent being declined loans.
“The banking crisis means lenders are terrified to lend to almost anyone,” says Sean Gardner, director of MoneyExpert.com. “They are battening down the hatches and focusing on getting as much money back as possible. In the current climate lenders are tightening up on already tightened rules for new applications.
“Anyone whose credit record is even remotely suspect risks rejection. Banks want to recover their bad debts and they don’t want to create more of the same.”
MoneyExpert.com is warning consumers not to apply for multiple credit cards and says people should be wary of applying for market leading offers if they know they have a less than perfect credit score.
Sean Gardner added: “It makes sense for lenders – and even borrowers - to reject applications from people with debt problems or who have already made multiple applications.
“People who know they don’t have a perfect credit record shouldn’t apply for the top products,” says Gardner. “Lenders just won’t accept your application, particularly in the current climate.”
