Credit Card Providers Get Choosey About Who They Lend To

Although figures showing how much credit card providers have reined in their lending over the past few months are hard to come by, there is widespread acceptance that credit card providers are being more selective with the type of people they currently give credit too.

More Credit Card Applicants Get Turned Down

The UK Cards Association estimates that around two to three years ago, one third of credit card applicants were being turned down, but it now suggests this number has risen. In fact, it goes as far to say that since the second half of 2008, somewhere between 40 and 50 per cent of all credit card applications are being rejected.
Defaqto, a financial research service also agrees that credit card providers are becoming more "choosey" about who they lend to.

David Black, banking specialist at Defaqto explained: "It is generally acknowledged that credit card providers are becoming far more choosey about who they will lend to and how much they will lend.

"In the mortgage market, credit card providers are after quality rather than quantity. Credit card providers also monitor their existing customers to determine those in, or possibly likely to be in financial stress.

"As a result, it's not unusual to get a letter saying that your credit limit is being reduced or your account is being closed."

Providers Change Interest Terms and Close Credit Card Accounts

In fact, according to a recent Confused.com survey which questioned 2,000 people from across the UK during the month of October, 20.4 per cent of those polled have had their credit card account closed in the past 12 months.

Of these, 29.2 per cent had their card closed by the credit card company. According to the respondents, their credit card was closed by the issuer because of their failure to keep up with the repayments.

Interestingly, 26.3 per cent of respondents also revealed their credit card provider had made changes to the credit agreement they had in place within the past year, which includes instances of increasing the interest rate and changing the credit limit. (See: How The Government Credit and Store Card Proposals Will Affect you.')

Meanwhile, the survey also showed that 37.5 per cent of people are concerned about applying for a credit card for fear of being turned down and the subsequent black mark that could be left on their credit file as a result.

Don't Be Put off Shopping Around to Find the Best Deal

The government is aware that consumers may be being unfairly penalised by shopping around for the best credit card deals, so the Treasury Select Committee is now seeking to understand the affects multiple credit searches have on individual consumer credit ratings by launching an inquiry into the issue.

It may be harder to obtain credit in the current recessionary climate, but you needn't be put off applying for a credit card just because you think it will damage your credit profile. You can check how likely you are to be accepted for a specific credit card by employing the use of a credit profile tool.