MoneyExpert.com recently found that over 3.5 million credit card applications have been rejected in the last 6 months in the United Kingdom. It also found that 1.6 million applications for unsecured loans were denied during the same six months. This study shows that, in the United Kingdom, financial institutions are still tight on their lending practices and are having a hard time letting go of their money.

The total comes out to around 120,000 rejections for credit on a weekly basis. Due to instability in the economy and unsteadiness about employment, creditors have been weary about lending and are trying to reduce the amount of defaulting on credit agreements by simply not writing any new agreements.

To exacerbate the situation, if you have defaulted on a credit agreement in the past, you will be finding it very difficult to get a new loan now. With a poor credit score, or limited credit history, you will also be finding it more and more difficult to even secure a credit card.

This has left consumers with very limited ways to get credit, so they are utilizing existing credit lines. Unfortunately, some are taking out cash advances on credit cards just so they can make the minimum payments on another. What a credit card company won’t tell you (at least not explicitly) is that the average APR on a cash advance is nearly 30%!

Things are getting even more difficult for those with credit card debt. Recently, in the United States, credit card companies have begun to raise interest rates and lower limits to customers who carry balances or who skirt the limit on their cards. With new interest rates and lower limits, the credit card companies can earn more money on fees and help with some of the losses incurred with defaults. In this case, when a customer defaults on the credit card, there are several hundreds or thousands of customers who get a raw deal.

The basic principle is to not get yourself more and more into debt because of one card. It all circles back around to debt consolidation. If you only have to pay on one balance, the chance of you defaulting on one account is reduced. You will also only have to know the one APR and the one monthly bill. There is also a fairly good chance that the payments can be reduced and you may even get to pay down or off your debt quicker.

This problem is not unique to the United States:

The United Kingdom Ministry of Justice released a statement saying that debt management business have been warned not to use misleading advertising any more. Some of the statements that have been considered to be misleading include:

“80% of credit agreements are unenforceable!”
“A positive outcome is guaranteed!”
“We have a 100% success rate!”
“We’ll get your credit cards written off within 6 weeks!”

Of course those are fraudulent and misleading claims. No one can reduce all their credit cards in 6 weeks if they have a seriously bad debt to income ratio.

This has obviously been a problem for some time, in 2006 Debt Free Direct appealed to the Advertising Standards Agency to try to stop the misleading claims that were being made by advertisements from competitors about IVAs and other debt management solutions.

Source:
Debt Free Direct