Are You Too Good For Credit?

People with great credit records are being turned down for the best credit card deals. There's a simple solution.

Ever met someone who's just toonice? No one can really be so good that it makes you feel physically sick, surely? It must be an act. But what's the point in being good if it puts other people off their food? Well, it seems that big businesses agree with you, because they don't want no goody-two-shoes either.

With interest rates possibly on the rise soon, companies will become more wary about increasing bad debts, so they'll be looking closely at the credit they offer the worst borrowers. (The baaad people!) What's surprising, though, is that right now companies are reportedly getting tougher on approving credit-card applications for borrowers with excellent credit records. People are being turned down or offered worse deals. We're conducting a Fool poll now about what happens to us when we've applied for a card. Why not vote and see the results for yourself?

We know that companies can't suddenly be worried that 'good' people are going to default in large numbers. Yet a typical scenario is that some angel has taken out a few credit cards and paid them off quickly. This goody-goody has shown that she is sensible with money, so you'd think she could get the best new deals as they turn up.

But many companies turn you down if you have too large a credit facility, regardless of how spotless your payment history is. Barclaycard now rejects around 13,500 applications a month. That's about half of all the applications they receive!

Cynics (me included) would argue that the reason for this is not, as the companies claim, because the size of the existing credit facility is too high. It's because credit companies don't want your business if you're going to be too good and pay your debt off straight away. (It makes them sick to see people handle money so cheaply!) The cards that goodygumdropses are struggling to get hold of are the 0% interest deals, because card companies know that these people will pay off their debt before interest starts being charged.

If you're turned down for a new card, it can seem like a catch-22 situation. The more applications for credit you make the harder it can be to get it, because lots of applications look bad on your credit record. However, credit companies look at the overall record, and they each assess your profile in different ways, so you shouldn't be put off from applying again with other companies. Some of them will appreciate your reliability to pay your bills.

In the words of one credit card customer: 'Don't feel bad if your application for credit gets rejected. I get turned down for credit more often than not.' So if you fail to get credit, just try again!

With honourable advice like this, maybe we should give these 'good' people a second chance? There are worse traits after all.

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