GenZ most reliant on credit as UK population continues to struggle financially
People in the UK continue to feel the strain on their finances due to COVID-19 with those aged 18 to 24 most affected – according to credit reference agency Credit Kudos’ second Borrowing Index, which drills down into the nation’s current borrowing behaviour.
The survey of 2,000 people across the UK found that almost two in five (37%) of the youngest adults have seen their finances impacted (compared to 26% across the UK), while 43% had to increase their borrowing since the start of the pandemic.
With varying restrictions across the UK to control the spread of COVID-19, a slow economic recovery and the Government-supported furlough and credit payment holiday schemes having come to an end in October, the future financial situation remains uncertain for many young adults. A quarter (23%) state that they have never needed credit more than they do now (compared to 17% across the UK) and one in five (20%) expect to start borrowing or increase their borrowing further over the next three months. Yet, two in five (42%) are afraid that credit is becoming more expensive due to the pandemic.
But it’s not just the youngest generation facing financial difficulties – people across the UK are struggling to make ends meet as they continue to rely on credit to get by. Almost three in ten (28%) credit users have had to increase their borrowing in order to cope with the financial disruption caused by COVID-19 – 2% more than in April this year.
With so many continuing to rely on credit, it is vital that they are able to access the right form of affordable credit to suit their current financial situation. One third (33%) of those surveyed worry that credit has become less available during COVID-19, and just under one in ten (8%) have been turned down for credit since March. Lenders have faced significant challenges assessing an individual’s affordability in these uncertain times, with traditional methods of assessing credit being up to 30-60 days out of date and providing limited information on someone’s current financial situation.
To support people during these difficult times, lenders need an up-to-date view of an individual’s financial situation to ensure they are lending responsibly. This can be done by drawing on data available made through government-backed Open Banking technology, a secure way for people to share financial transaction information with specially regulated companies to get personalised products and guidance.
Using insights, built on top of Open Banking data, lenders are given a richer understanding of an applicant’s current financial situation and whether the credit product they are applying for is affordable for them. Credit Kudos’ second Borrowing Index found that an increasing number of young adults are inclined to use Open Banking. When asked whether they would be willing to securely share their financial information through their bank to increase their chances of being accepted for a loan, mortgage or credit card, only one in ten (9%) of those aged 18 to 24 say they would not do so (compared to only 15% across the UK). This is 3% less than in April this year, when 12% of the youngest adults stated they would not be willing to share their financial data.
Freddy Kelly, CEO and founder of Credit Kudos, said: “The economic downturn caused by COVID-19 continues to put a real strain on individuals’ finances – with the youngest adults being hit hardest. As millions of people continue to struggle, a growing number of lenders are harnessing Open Banking data to better support customers through these uncertain times.
“With new national and local restrictions in place to curb COVID-19 and government support becoming less available over the next months, financial hardship for many households is expected to continue. It’s therefore crucial that people can access the right financial products when they most need it. Insights from Open Banking data help lenders make more informed decisions, enabling them to provide the best suited financial product for the individual’s unique financial situation.”