18,000 Credit Card Rejections Every Day
An eye-catching statistic that has cropped up over the past few days is that an estimated 18,000 credit card applications are being rejected every day. 3.24 million credit card applications have been rejected in the last six months, as wary lenders tighten their criteria for credit cards. 7 per cent of adults in the UK have been denied a credit card in the last six months. Clearly, the UK’s appetite for credit is still there – it’s just that the supply is drying up.
Not only are rejections for new cards up (Barclaycard is being especially cautious, rejecting over 50% of new card applicants), but an estimated 1.8 million card users have had their credit limits reduced. Some card companies are even trying shed their existing customers; Egg froze the cards of over 160,000 problem customers earlier this year. Last year, everyone wanted to get in to the credit and insolvency industries – now they are falling over each other in their attempts to back out again.
This rejection effect can be cumulative – being rejected for a credit card is a black mark on your credit record, which makes it even harder to get any credit next time. There is a danger here that those with a borderline credit record who are seeking to refinance their way out of trouble may get caught in a downward spiral, as rejections pile up and damage their credit record still further.
Curbing the UK’s credit addiction is a necessary step, but some access to credit is needed to give people the flexibility to survive, particularly in troubled times like these. Plenty of people are borrowing just to ends meet, as they struggle to readjust to the rapidly rising cost of living and stinging mortgage increases. The gradual withdrawal of easy credit is a natural response to the credit crunch (and a healthy one), but the sudden disappearance of credit for everyone except those with pristine credit rating is likely to worst affect those who are at the ‘tipping point’ between serious debt and insolvency.
