Recent trends illustrating a tightening of credit availability may be having an adverse effect on millions of people, new research from price comparison service uSwitch suggests.

According to the firm, recently introduced practices have resulted in 2.5 million Britons incurring annual credit card fees, having their account closed or having their credit limit reduced. In its inquiry, the group asks whether in implementing such practices, credit card companies are simply trying to minimise their exposure to risk and indebtedness or are trying to filter out less profitable customers.

Statistics from the group suggest that 1.6 million people have had their credit limit reduced, while an additional 1.3 million have either incurred an annual fee for their account or have had it closed down altogether. For those people who have been forced to close a credit account but lack the funds to make payments, a cheap secured loan may be of use in providing the funds necessary to repay their debt without their credit rating being adversely affected.

Indeed, of those who had their account closed or were charged an annual fee for keeping it open, 25 per cent were told that this was due to their poor credit history. For a further 27 per cent, creditors gave no reason at all. According to 16 per cent of respondents who incurred fees or had their account closed, the stated reason was that they were not using their credit cards.

However, 51 per cent of those affected were said to be using their cards regularly and making at least minimum repayments, with 20 per cent paying their bill in full each month. Just 16 per cent were found to have missed a repayment. With 71.8 million credit cards in use throughout the country, uSwitch urges creditors to do more to protect consumers from indebtedness and provide more transparent information regarding their account management decisions.

Simeon Linstead, head of personal finance at uSwitch, comments: “We’re not against credit cards providers curbing consumers’ spending if their debts are genuinely getting out of hand. However, resorting to account closures, reducing credit limits and implementing annual or monthly fees without providing over one in four people with a reason for doing so is not good for consumer confidence or financial planning. Credit card companies who are taking action to close down or make changes to customers’ accounts must be completely open about how and why they have selected those customers.”

For those who are finding it difficult to get backing from creditors, a poor credit loan may be of assistance in providing the additional cashflow needed to meet living costs. In keeping up with payment obligations, people may find that their credit rating improves over time. However, uSwitch notes that for a number of people, checking credit reports has not been a priority, with 29.6 million adults said to have failed to check their status in the past year. The firm reports that alarmingly, of those who did check, 13 per cent found errors such as payments being inaccurately listed as missed.

Elsewhere, Sainsbury’s Finance has recently revealed that rising living costs are stopping many young people from getting on the property ladder. Furthermore, a third of people aged between 25 and 34 said that they were not in a position to save money. For those who are struggling with credit repayments, a bad credit loan may be of assistance in providing the funds necessary to handle monthly outgoings and possibly put a little aside for the future.

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