Nearly a third of Brits (32%) have been turned down or not got the rate they wanted when applying for credit, rising to 57% of 18-34 year olds
Of these young people, 65% have been turned down for credit multiple times and a quarter (25%) have been turned down more than five times – equating to over one million young people
Yet nearly half of young people (49%) turned down didn’t check their credit report before applying for credit
40% of young people rejected for credit turned to payday loans and over a third (36%) turned to pawn shops or cash for gold services
Over a quarter of Brits (27%) who don’t know their credit score don’t want to pay for the information but if it was free, 83% of these said they would check it
This is why Uswitch has launched, ‘It’s My Report’, a campaign with the backing of over 15,000 consumers, calling for a change in the law to make it mandatory for a person to be given the specific reasons why they have been turned down for credit when details from their credit report were a factor.
Over a million young people in the UK are trapped in a vicious circle of credit applications and rejections, having been turned down more than five times by banks or credit card companies. This is driving them to payday lenders or pawn shops, as many don’t understand the implications of applying multiple times, according to new research from Uswitch.com, the price comparison and switching service.
The findings reveal that nearly a third of those who have applied for credit in the UK (32%) were turned down, rising to 57% for young people aged 18-34. These young people are most likely to apply for credit multiple times, with nearly two thirds (65%) of those who have been turned down having been turned down more than once and 25% being turned down more than five times – equating to over a million young people. Any application for credit appears on your credit report, and several made in quick succession says to any prospective lender that you are having difficulty in securing credit – so they’ll be less likely to lend to you.
This vicious circle of credit applications and rejections is driving more young people to borrow from unscrupulous lenders than any other age group. 40% of young people who have been turned down for credit said they were forced to take out a payday loan when turned down for credit, compared to just 26% of all other age groups. In addition to this, more than a third (36%) also said they’ve turned to pawn shops or cash for gold services, compared to just 21% of everyone else . And if they are unable to repay loans from these lenders, young people will be facing an even bleaker future with more black marks on their credit report.
This is because, despite being turned down multiple times, young people are less likely to check their credit report when rejected than any other age group. Nearly half (49%) of those who were turned down for credit didn’t check their report before applying to see if they were likely to be accepted despite each application leaving a mark on their credit report.
With young people now finding it harder than ever to get on the property ladder, many believe that it’s not as necessary to know their credit score as they aren’t applying for mortgages. Nearly half (49%) of young people who hadn’t checked said they had never applied for anything which needed a credit report. However, respondents were unaware that their credit score can affect them in other ways. 54% of 18-34 year olds asked were unaware that their landlords have access to their credit report, and 74% unaware that prospective employers could have access.
The findings also reveal that the costs associated with checking credit reports are preventing young people taking action. A third of young people (33%) who don’t know their credit score don’t want to pay for the information but if the report was free, 93% said that they would check it. This is why Uswitch.com has launched It’s My Report calling for a fairer approach to the way credit reports are created and shared in the UK.
David Mann, Head of Money at Uswitch.com, says: “Young people are blindly reapplying for credit again and again but don’t realise the consequences this scattergun approach has on their finances. To break the endless cycle of credit rejections, they need more information about why they’re being turned down and what they can do about it.
“Although it’s disheartening when you’re rejected for credit, it’s important not to reapply straight away but take stock of your situation and find ways to improve it. By checking your credit report before applying or running a soft check with lenders to see if you’re likely to be approved, you can avoid those black marks on your record and build a strong score. This is why thousands have signed It’s My Report already, calling for credit reports to be free, fair and fit for purpose.
“A poor credit rating could be the final nail in the coffin for young people who are already facing tough decisions – struggling with rising living costs and the challenge of getting onto the housing ladder. Being rejected by banks is driving many to payday lenders with extortionate interest rates, or to pawn their belongings just to make it to the end of the month.”
Sign our petition for change at ItsMyReport.com
All research referred to was conducted by Opinium unless otherwise stated. Opinium Research carried an online survey of 2,001 UK consumers aged 18 – 55+ between 7th – 9th October 2014. Percentages and figures not used in grossed up calculations refer to the proportion of the whole sample unless otherwise stated.
According to the ONS population projections for 2013, the estimated UK population aged 18-34 was 14,578,277
In the survey, 57 respondents said that they had been turned down for credit more than five times. This is 9.84% of the total sample of 579 aged 18-34. 9.84% of the UK population aged 18-34 is equivalent to 1,434,503.
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