The availability of credit cards bounces back for those with higher credit scores

New data suggests borrowers with better credit scores have found it easier to open a credit card since July as banks began turning their lending taps back on.

And figures from credit rating agency Experian found that half of those looking for a credit card in the past month showed at least one card they were guaranteed to get, up from 24 percent in July.

At least one pre-approved card at the beginning of March showed about 55 percent indicating recovery to pre-coronavirus levels.

Experian found that half of consumers showed at least one credit card they were guaranteed to get in August, just below pre-coronavirus levels in March.

However, the increase was driven by borrowers deemed by the rating agency to be more creditworthy, with a 33-point increase in the percentage of those with “good” scores showing a secured card between July and August, and a 37-point increase among those with “excellent” scores.

There have been “significant improvements in the credit market” over the past few weeks, said Amir Gushtai of Experian, with 50 percent more credit cards available in August than in July, and more consumers becoming eligible for personal loans.

He said the growth in credit card availability was “more influenced by changes in lenders’ risk appetite”.

Britain is starting to borrow again, with the latest figures from the Bank of England finding that consumers borrowed more than they repaid in July for the first time since February, but the amount being borrowed from credit cards and loans is still about a fifth less than the pre-coronavirus average. .

Lending by credit card and personal loans in July was 29 percent lower than in the same month a year ago, according to figures released Monday by the Finance and Leasing Association.

And although more consumers were offered credit cards that were guaranteed, Experian’s data didn’t include whether they got an advertised annual interest rate or a higher rate, or a lower credit limit.

When This is Money is checked, the only pre-approved cards — with an excellent credit score — were offered by Capital One and came with a 37 percent annual interest rate, well above the average rate of 25.2 percent.

John Crosley, head of money at comparison site Market Comparison, said they were also “seeing some lenders return to the market, but remain cautious, with their risk appetite remaining below pre-lockdown levels”.

A June survey of lenders by the Bank of England found that they expected the availability of credit cards and loans to drop between July and September and to tighten their lending standards, although not as much between April and June when they had to support existing millions. From customers with a three-month payment holiday.

Mr Crosley added: “Although there are options available, it is worth checking the small print and the terms and conditions. Those on offer are likely to have terms such as lower credit limits or higher interest rates.

Andrew Hager, founder of personal finance site Moneycomms, also cautioned consumers to check details of any deals they were offered to see if the credit card cost more than advertised.

And despite a slight increase since July, the number of available interest-free credit card deals remains near a record low, according to data from Moneyfacts.

In January, there were 70 interest-free purchase deals and 76 balance transfer credit card deals available, but this had dropped to 53 and 57 by the start of September, with lead time shortening by 0 percent as well.

“It is worth taking the time to check if you qualify for a credit card with an easy eligibility checker that prevents damage to your credit rating and allows you to see which deals are most appropriate to your financial circumstances for which you can be accepted,” said John Crosley.

Tandem Bank to close credit cards

One bank that isn’t eager to extend more credit to borrowers is smartphone-only credit card provider Tandem Bank.

On November 2, the bank will close both its Credit Building Journey card, which has a 24.9 percent APR, and its cashback card, which closed to new customers in December.

The card was re-launched as a completely interest-free deal with a membership fee of £5.99 in January, which required customers to spend £1,200 a month to earn enough cashback, at a rate of 0.5 per cent, to cover it.

Customers will have the cashback until November 2 credited to them and they will see any money owed to them transferred to their bank account after they close their account.

Meanwhile, borrowers will have until February 3, 2021, to clear their credit.

CEO Ricky Knox said: The impact of the coronavirus on the way people spend now in the “new normal,” along with a strategic decision to invest in developing the core banking technology that underpins Tandem’s products and services, led us to the decision to withdraw our existing credit card offering.

“It doesn’t mean we’ll never offer a ‘spend’ solution again, it simply means our immediate focus will be on building the best savings products we can and helping more and more of our customers fund their green home investments.”

That’s five money from the best credit cards

Some of the links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to influence our editorial independence.