Millions of Brits turn to high-cost credit
Millions of Brits are turning to high-cost credit solutions such as payday loans and short-term loans after being turned down for traditional lending products.
According to new research from CRIF, one in 10 Brits have been turned down by a traditional lender since 2020, with half of those turning to high-cost credit instead.
CRIF also found that almost half (46 per cent) of UK consumers never think about their credit score. This is significantly higher than the European average of 31 per cent.
Furthermore, 48 per cent of Brits said that they don’t understand how their credit score is calculated, and 20 per cent said that if their score went down they wouldn’t know how to improve it.
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Among those UK consumers who have been turned down for a loan, 64 per cent said they received no information from their lender on how to improve their situation; while 52 per cent were surprised to be turned down as they believed they had a good credit history.
The research also found that one in five Brits expect to have to borrow more from their lender within the next 12 months.
“The increasing cost of living is putting huge strain on people’s finances,” said Sara Costantini, CRIF’s regional director for the UK and Ireland.
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“The fact that many more plan to turn to their banks for financial support, coupled with rising interest rates, mean it’s vital that people have a good grasp of their creditworthiness.
“However, there is a severe lack of awareness and understanding among people in the UK of their credit score, how it works and how to improve it. During these challenging economic times, it’s critical that consumers and businesses alike fully understand their creditworthiness.”
Costantini added that financial providers need to work to engage and improve people’s understanding, utilising innovations in open banking, and enabling more accurate, lower-risk lending decisions that can help people avoid turning to more costly forms of credit.
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