Credit card rejection hits three million

Hard-line lenders are cherry-picking the best customers as hard-up folk run up record debts
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More than three million people have had their application for a credit card rejected in the past 12 months. .

Research from comparison website Totally Money suggests that one in 10 applications is turned down as lenders continue to play tough with borrowers who have even the faintest stain on their credit record.

But even applying for a card and being turned down can leave you with a black mark, lessening the chance of being accepted next time you apply.

But the research revealed that a fifth of those who were turned down for a card tried immediately to get an alternative from another firm. In the process causing much more damage to their credit score.

Even those with years of using plastic cards are getting rejected for many of the headline best-buy deals, plastic card companies now offer to tempt customers. Barclaycard, for instance, is currently offering 0 per cent for as long as 28 months — until the end of 2015.

"These are frustrating times for credit card customers as they are bombarded with some of the best balance transfer deals in history but they simply cannot get them," pointed out Will Becker of Totally Money.

"Consumers must be made aware that many of these deals are only available to those with a squeaky clean credit record."

In other words the credit card firms are using low-cost rates and long-term interest-free deals to cherry-pick the best customers from their rivals, leaving the rest of us on poorer-paying deals and, after being rejected, with a lower credit score.

It's not just the sting of rejection and the challenge of getting future credit that hurts, but the fact that many cardholders are effectively being forced to pay much more interest than necessary.

Totally Money reckons rejected consumers are left languishing on deals which could be costing £108m a month in interest payments.

However, there are a couple of things people can do to reduce the chance of future rejection. The first is to ensure you're included on the electoral register. That's a crucial piece of information used by lenders when deciding to borrow.

Next is to ensure you don't miss any monthly payments on your existing plastic, mortgage or other bills. The risk that you may not repay the debt will get you the blackest mark possible on your crdit score.

Meanwhile new figures published this week revealed that those that are being accepted for credit seem to be unable to control it and are running up debt in record levels. Consumers borrowed a record-breaking £8.4bn on their credit cards in August, according to official figures from the British Bankers' Association.

The figures raise fresh fears that millions are surviving day-to-day on credit, with a recent Which? report suggesting more than five million people are borrowing to pay for essentials, such as food.

The new figures revealed that more than four million plastic card transactions a day are currently being processed in the UK. Frighteningly, the figures show the total that we collectively owe on credit cards has reached an all-time high of £38.7bn.