A new credit rating system which could help prevent many people falling into debt has been unveiled.
Scientists at the University of Edinburgh said their method took account of general economic conditions and not just a person's credit history.

They believe taking account of interest rates, consumer confidence and earnings will allow lenders to assess risk more accurately.

The scientists hope banks and building societies will now test the system.

Most banks and credit card providers draw on information such as an individual's debt payment history, occupation and how many times they have moved home.

Professor Jonathan Crook, of Edinburgh University's Credit Research Centre, said his tests using the extra criteria were more accurate in predicting debt defaults.

'Higher risk'

He said: "Increases in earnings and the FTSE index - which are indicators of a improving economy - all provide conditions for reduced risk of default.

"On the other hand, higher interest rates, greater unemployment and rising house prices - which have a direct impact on people's pockets - all result in a higher risk.

"So, too, does greater consumer confidence because people spend and borrow more.

"We have found that this does allow better predictions that some people will default."

The number of people being turned down for credit cards has soared recently, with companies also increasing the fees and rates they charge as a result of the global credit crunch.

Financial website MoneyExpert.com said an estimated 3.27 million people had credit card applications rejected in the six months to the end of September, 17% more than during the previous six months.


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