Credit Cards & Loans
1m+ young people refused credit five or more times
Over a million UK residents aged 18-34 are trapped in a vicious circle of credit applications and rejections – having been refused credit more than five times – according to new research from uSwitch.com.
The findings reveal that while nearly a third (32 per cent) of those who have applied for were turned down overall, this figure rises to 57 per cent for young people aged 18-34. This group is also more likely to apply for credit multiple times, with nearly two thirds (65 per cent) having been turned down more than once, and 25 per cent being turned down more than five times.
This cycle is driving young people to turn to higher rate lending options; 40 per cent of 18-34s said they took out a payday loan when turned down for credit, compared to just 26 per cent of all other age groups. More than a third (36 per cent) said they’d turned to pawn shops or cash for gold services, compared to just 21 per cent overall.
Young people are also less likely to check their credit report when rejected than any other age group. Nearly half (49 per cent) 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.
However, respondents were unaware that their credit score can affect them in other ways. 54 per cent of 18-34s were unaware that landlords can access their credit report; 74 per cent were unaware that prospective employers could have access.
“Young people are blindly reapplying for credit again and again but don’t realise the consequences this scattergun approach has on their finances,” said David Mann, head of money at uSwitch.com. “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.”
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“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. A poor credit rating could be the final nail in the coffin for young people who are already facing tough decisions.”
For more information on credit scores, please visit ‘Some simple ways to destroy your credit score’, and ‘Ten ways to give your credit score a boost’.