Credit Cards: Tighter Lending Criteria

In the wake of the recent news that the Financial Services Authority is moving to institute tighter criteria to govern mortgage lending, we wonder whether there should there be a similar move to curb excessive credit card limits.

Managing personal debt can be a difficult process at the best of times and the added temptation to overextend yourself is something that most of us could do without. Just as self-certified mortgages are to be banned, making potential homebuyers undergo rigorous credit checks before they apply for a mortgage, a policy of allowing people to pretty much pick their own credit limit should be a thing of the past too. The Financial Services Authority is also starting to take a firm line on the banks’ practice of upgrading people’s credit card limits without first checking that they are not taking on too much debt overall or even asking them if they would like their credit facility extended.

Credit Card companies are regulated by the Office of Fair Trading and must adhere to the Consumer Credit Act. As the Office of Fair Trading administers and maintains the proper implementation of the Consumer Credit Act, any attempt to modify the credit card companies’ lending criteria would have to come as a result of a full legislative change to the Act, tabled by the Department for Business, Innovation and Skills.

Mortgage debt is far more high profile than credit card debts, mainly thanks to the inherent risk to the sanctity of the family home and the fact that, in the majority of cases, it is simply the biggest debt that you are likely to take on in your lifetime. However, the perpetual lure of a seemingly inexhaustible credit stream can undermine and erode the bedrock of your families’ finances, doing vast amounts of damage to your economic stability in a more subtle and insidious manner. The end result could still be the loss of your home as interest and charges mount up, leading to bankruptcy and potential repossession.

It can be a slippery slope but just as there are those that would have you spiral further and further into debt, there are places to go for debt help. The most important thing is to get debt advice as soon as you can foresee potential payment difficulties. Talk to a specialist debt advisor at Harrington Brooks, one of the longest established financial practices in the UK (0800 048 1764). They’ll be able to offer you a personal debt solution that will hopefully help you to avoid bankruptcy and manage all of your different debt.