Jeff Salway: How to find relief from tightening credit terms

And when interest rates rise, the financial difficulties facing those unable to secure affordable credit will tip many over the edge. Keith Dryburgh, of Citizens Advice Scotland, claimed that access to affordable credit had long been a serious problem for Scots on low incomes, even before the recession.

"Many find it difficult to access affordable credit from their bank and other mainstream lenders, and are forced to look for risky, high-cost credit to buy essential items," he said. "This type of credit agreement – with APRs that reach into triple figures – can quickly plunge people into a cycle of debt."

Securing affordable credit has become more difficult over the past two years, with repayment costs soaring and lenders turning away all but the least risky borrowers. The average credit card rate was 16.52 per cent at the end of March, according to the latest Bank of England data, the highest since June 2006 when the base rate was 4.5 per cent.

With credit card providers cherrypicking customers, the best rates are now available only to those with the cleanest credit records.

And the situation is unlikely to improve any time soon, warned David Black, banking specialist at researcher Defaqto. "Many more consumers are being excluded from the credit card market by having their applications refused and this trend looks set to continue," he said.

Most providers now use personal pricing, basing the interest rate offered on the applicant's personal details, credit record and repayment history. Of those that are accepted, roughly two-thirds get the best rate and up to one-third will get offered a higher rate, according to Defaqto.

Black said: "It always used to be fairly straightforward to get a credit card, but providers have become increasingly choosy about who they will lend to and, if they will lend, at what rate. Many consumers don't even get to that stage because the number of credit card applications being rejected has shot up."

Even the so-called subprime lenders serving those unable to secure credit in the mainstream market are now rejecting most applications. One of the biggest is Provident Financial-owned Vanquis Bank, which offers credit cards with APRs ranging from 39.9 to 59.9 per cent. Yet Provident's latest annual report revealed that Vanquis turned away 83 per cent of the one million applications it received in 2009 after tightening its underwriting criteria early in the year.

The problem for those trying to obtain new credit is exacerbated by the impact of repeated applications on individual credit records. Credit card applications are recorded regardless of whether they are successful or not and can count negatively on a lender's credit scoring, so it's best to leave at least three months between applications.

Black said: "As an individual's credit rating deteriorates, it becomes increasingly difficult to get a credit card and when their application is successful, they will often find that the providers' use of 'personal pricing' will mean that the interest rates may be higher than they anticipated."

Consequently, borrowers are advised to regularly check their credit records with agencies such as Callcredit, Equifax or Experian, to ensure they are accurate and up to date. It is possible to access the information online for a fee or sign up to free trials giving access to the same information. Discrepancies on credit records should be raised with the company concerned.

Some providers, most notably Barclaycard, now help customers protect their credit reports by allowing them to check their chances of being approved for different cards in its range without having to make a full application. The advantage is that pre-application leaves only a search "footprint" on credit files, which denotes that credit information has been accessed but not as part of a formal credit application. Nationwide also offers a "soft search" for cards that doesn't leave marks on credit reports.

Similarly, comparison site Moneyextra last week launched a credit card profiler helping applicants preserve their rating while searching for credit. The tool, at www.moneyextra.com/credit-cards, gives applicants a better chance of securing credit without damaging their credit records by asking a series of questions and providing a list of cards they are most likely to be accepted for.

But Dryburgh called for banks and credit card companies to be more socially aware by making responsible lending more widely available.

"If they are not, then the government should regulate them more and should also invest in more credit unions and other social lenders to give people greater choice. The days of universal credit must be over, but we could move to an era of responsible credit instead."