Over stretched credit cards for graduates with student loans

Thu, 11 May 2006

Many graduates and students could be facing an unstable financial future as credit card providers continue to grant them credit extensions, warns a credit reference agency.

The agency CallCredit believes that the failure of the government to provide adequate details on student loan accounts means that many credit card companies are granting graduates too much credit that they can't afford to pay back.

To assess an individual's suitability for extended credit, credit card companies will access shared information about an individual's level of debt and repayment history to reach a decision.

However, credit card companies are unable to access any information about whether an individual has a student loan.

This refusal to reveal information has many knock-on effects for both the credit card company and the potential borrower, according to CallCredit.

It can mean that someone who is having student debt repayments taken off their salary at source is granted credit they can't afford as their salary is less than they declared.

It can also result in people who have made regular repayments on their student loan being turned down for future credit applications as they have no accessible form of credit history.

Mel Mitchey, the director of industry affairs at Callcredit is calling for more debate on the issue, arguing: "To many people it's a no-brainer, the information should be shared as it would help people who have a responsible attitude to their student debt and prevent those who are already in difficulty being granted further credit."

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