Figures from Ocean Finance indicate that lenders have been taking a cautious approach to approving new credit over the past 12 months, with the surprising exception of applications for first mortgages.
These proved to be among the easiest conventional lending to secure, with an 84.5% approval rate for first mortgages, equating to a 15.5% rejection rate.
In contrast, 18.6% of overdraft applications were unsuccessful, while in the alternative peer-to-peer lending channel the rejection rate was just 14%.
Peer-to-peer lending often involves smaller sums of money, and uses a diverse portfolio as a way to reduce the risks faced due to any one debtor failing to repay what they owe.
With around one in six applications for credit facing rejection, it is significant to note that the total proportion of Britons applying to borrow is on the increase, from 33% a year ago to 38.6% now.
Ian Williams, a spokesman for Ocean Finance, said: “Applicants’ credit ratings could be standing against them, even if they don’t know it.
“It’s therefore worthwhile checking your credit score before you apply for credit so you can see what your lenders see and – if it’s necessary – take steps to improve your rating before you apply.”
Just as borrowers should be checking their credit score, it is equally important for lenders to do so before approving an application – and that applies to all companies who supply products or services, with payment made later.
By ensuring you do not give credit to customers who cannot afford to pay it back, you can protect your cash flow – the life blood of your business.
CPA are hosting a webinar on May 28th, looking in more detail at the importance of credit checking. For details about how to register, follow us on Twitter @CashProtection.