Credit has never been so difficult to obtain and tight conditions have meant that many lenders are only willing to deal with an elite group of people who have almost perfect credit histories and an easily provable income stream.
Many consumers simply face rejection, with one in 10 having credit card applications rejected in the past year, and 1.2m being turned down for increased credit limits, according to uSwitch.com.
"If you have even a few credit blemishes you're not going to get the best deals, and every time you apply for something it will leave a footprint on your credit reference," says David Black from information service Defaqto.
Furthermore, lenders take a dim view of multiple applications and failed attempts to obtain credit can sully records. This in turn renders borrowers even less likely to be successful in the future.
Lenders are under no obligation to offer credit, and each uses its own criteria. But most rely heavily on information supplied by credit reference agencies to help them assess how much of a risk a consumer poses. In the UK there are three such agencies – Callcredit, Equifax and Experian. A credit record contains details from sources including the electoral roll, public records and previous lenders; details will include County Court Judgments and information on previous credit accounts, including missed payments.
Hoping to provide a solution to the problem, Experian has introduced the LowerMyBills service which uses consumers' credit information to match them with firms more likely to accept their applications. This therefore improves their chances of success and preserves their credit score.
"What we've done to make this service work is liaise with lenders who tell us what kind of credit score they are looking for, for a particular product," says Darryl Bowman, from CreditExpert, the online arm of Experian.
The LowerMyBills service is only available to people who sign up to CreditExpert's online credit record monitoring service, which costs £6.99 a month. There is a free 30-day trial.
Price-comparison service Moneysupermarket.com has its own version of this with the SmartSearch tool which also helps applicants wade through their options and pick products they are most likely to be accepted for. This works slightly differently in that it relies on the consumer filling out a questionnaire and is therefore only as reliable as the information entered, but essentially it works on the same principle. The SmartSearch tool is free .
The first thing consumers should do before applying for credit is to check their credit report and correct any inaccuracies. Another way to improve creditworthiness is to close unused accounts. Applicants may also have more success with a lender they already know. "One issue lenders are concentrating on is cross-selling to existing customers, because they have a better knowledge of them," says Mr Black.Reuse content