Which? magazine has recently found that unsecured loan sharks are still alive and well and are still preying on those who should be considering secured finance only during this recession.

An undercover store card investigation by the publication has seen an indebted graduate handed £2,750 of credit on the high street, despite him having earned less than £1,000 this year.

The consumer rights body sent 21-year-old graduate James Smith to pose as a shopper in 20 of the biggest high-street stores. He bought a variety of items costing between £50 and £100 and asked whether he could get discounts by taking out a store card – in total, James was able to get £2,750 worth of credit on cards from six stores with interest rates ranging from 18.9% to 28.9%.

Although he had twelve credit checks over two days, James was still able to get credit at the end of day two. Also, in eight of the twelve shops where James applied for credit filled in the forms containing terms and conditions for him, only asked him to sign at the bottom – arguably not giving him a proper chance to read the important small print.

James Daley, editor of Which? Money, says: “No one is James’ position should be given access to £2,750 on store and credit cards in just two days, or be able to continue getting credit after so many applications have been made in such a short space of time. The question remains whether stores should be handing out credit at all."

This case highlights that it is so easy to get credit and it is so tempting. But it also highlights the fact that too much credit without proper advice and guidance can destroy your credit score and make you a financial pariah for years.

Simply, you have to fight temptation. Unsecured debt, whether it is from a shop or a bank, is bad news. If you need credit, talk to a professional who can help you with a secured loan or a remortgage – secured debt is the only thing any borrower should be considering during the recession, regardless of temptation.

SOURCE: Which?, 18/11/09

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