BORROWERS are finding it increasingly difficult to get a good deal as banks respond to the credit crunch, and the Bank of England warned last week that things are unlikely to get better for some time.

Governor Mervyn King said it was likely to be several months before banks returned to normal, while chancellor Alistair Darling did little to cheer those seeking credit when he claimed that it would be “no bad thing” if institutions became less cavalier about handing out cash.

Tim Moss at the comparison website Moneysupermarket said: “People with near-spotless credit records are finding it difficult to get low rates.”

Fortunately, there are steps you can take to beat the credit crunch. Here are some ideas.

Cut up unused credit cards

Credit card companies are clamping down, with up to 3.27m people having their applications turned down in the past six months, according to comparison website MoneyExpert – an increase of 17%.

It is not just borrowers on low incomes or with big debts who have been caught in the crossfire – even wealthy applicants could be turned away if they are unlikely to boost profit margins.

Those who switch from one 0% deal to another, for example, are increasingly likely to be refused because there is simply less credit around.

Meanwhile, even high earners who have had no problems getting credit in the past are also likely to find themselves on the banks’ blacklist if they hold lots of cards but make little or no use of most of them.

Owen Roberts of Callcredit said: “Card companies will take into account the amount of credit you have available when considering your application – even if you don’t use it. People with lots of cards will therefore appear less desirable.”

Bypass the banks

Lenders are becoming more picky with new customers, and a number have stopped offering personal loans altogether.

The result is that loan rates have risen, with NatWest making Moneyfacts’ best buy tables for a loan of £5,000 over three years despite having a rate of 9.9%. Earlier in the year, rates were below 6%.

However, banks and loan companies are no longer the only option. Social lending website Zopa cuts out the middle man to bring together borrowers and individuals happy to lend to them at a certain rate.

Its new listing service, where people post details of why they want to borrow the cash, offers borrowers who find a sympathetic audience the chance to get even lower rates.

Drew Wrangles, 28, used the site to get a £2,000 loan for his honeymoon to Vietnam.

Wrangles, a communications manager from London, said: “In the early stages, the rates I was being offered were around the 15% mark. However, there were 50 bids in the last weekend alone and I ended up with a rate of 7.5%.”

Another advantage is that there are no charges if Wrangles repays the money before the end of the one-year term.

Those keen to take a more traditional approach can improve their chances of being offered a loan by using Moneysupermarket’s “smart search” facility.

The software can greatly increase an individual’s chances of being approved by matching you with a lender that best meets your criteria.

Boost mortgage payments

The more equity in your property, the greater the chances of you getting a good rate, so pay off some debt while you can.

James Cotton of broker L&C Mortgages said: “Overpaying reduces the interest you pay on your mortgage, allows you to build up a fund that you can draw on in the future and also opens up a wider range of deals when you want to switch.”

Those worried about being unable to meet their future payments can switch to a fixed-rate deal, protecting them from rate rises.

Cotton said: “West Bromwich building society currently has a two-year fix with a rate of just 4.99% and a £1,999 fee, which would be good for those with large loans who want to be sure of their payments.

“For those wanting to take a bet on interest rates going down, Holmesdale building society’s two-year tracker at 5.65%, or 0.1% below base rate, has just a £250 fee but is only available for those with 25% equity.”