The Financial Conduct Authority (FCA) has signalled a fresh crackdown on credit card affordability checks, set to take effect later this autumn. If you are planning to apply for a new credit card or a balance transfer deal, the goalposts are about to move.
What are the new FCA rules?
Lenders will now be required to apply stricter "stress tests" when assessing new credit card applications. Currently, lenders assess whether you can afford the minimum payments on your requested credit limit. Under the new guidance, lenders must calculate whether you could afford the payments if interest rates were to rise significantly, or if your income were to drop unexpectedly.
This is designed to prevent consumers from falling into a "persistent debt" trap, where they are only paying off the interest and never clearing the principal balance.
How will this affect your credit applications?
The immediate impact is that approval rates for new credit cards are likely to drop. Consumers who previously would have been approved for a £5,000 limit may now only be offered £2,000, or may be rejected entirely if their Debt-to-Income (DTI) ratio is too high.
- Lower credit limits: Lenders will be much more cautious about how much credit they extend.
- Stricter income verification: You may be asked to provide more proof of income through Open Banking rather than just stating your salary on the application form.
- Higher rejection rates for high-utilisation customers: If you are already using a high percentage of your existing credit limits, lenders will be far less likely to approve you for more.
What you need to do right now
If you need to apply for a 0% balance transfer card to consolidate debt, it is crucial that you optimise your credit file before the new rules take full effect.
First, check your statutory credit report for any errors that could drag your score down. Second, pay down as much of your existing balance as possible to lower your credit utilisation ratio. Finally, always use an eligibility checker before formally applying for a card, as a rejected application will leave a hard search on your file, making it even harder to get approved elsewhere.