20% of loan applications refused
Updated on 15 October 2008
One in five people who have applied for a credit card or loan during the past six months have been rejected by lenders, research shows.
Around 13% 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% had one for a loan rejected, according to MoneyExpert.com.
The group estimates that a total of 3.27 million credit card applications and 1.56 million 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% up from 16.77% in March last year, while the average rate on a £5,000 personal loan has nearly doubled from 8.6% to 15.3% 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% of applicants in this age group being rejected for credit cards and 10% being declined loans.
Sean Gardner, director of MoneyExpert.com, said: "The banking crisis means lenders are terrified to lend to almost anyone.
"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."
He warned people not to apply for multiple credit cards, adding that people who knew they had less than perfect credit records should avoid applying for market leading deals, as lenders were unlikely to accept their application in the current climate.
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