New research from Laybuy, a leading buy now, pay later service, has today revealed young adults in the UK are twice as likely to know their Uber score than their credit score.
The research, which polled 2,000 Gen Z and Millennials across the UK to reveal attitudes towards credit ratings, found that the 40% of Millennial eBay users (40% London Millennials) and 35% of Airbnb users (35% London Millennials) in the same age group that know their rating for these channels massively exceeds the 22% who know their credit score (27% in London).
The mis-education of Millennials
The research reveals that just half of British young adults (50%) and half of Londoners know where to find their credit score. Many made incorrect assumptions that it could be sourced from employers (10%; 14% in London), banks (42%; 47% in London) and even insurance companies (11%; 14% in London). Just 1 in 10 (13%; 16% in London) can confidently explain exactly what a credit score is, whilst only 9% can explain how it is calculated (12% in London).
Crucially, it seems the majority are also misinformed about what financial activity impacts the all-important rating, with the research revealing that:
- 40% believe salary contributes to credit rating (46% in London)
- 1 in 10 believe that ordering food on apps like Deliveroo contributes (14% in London)
- 8% believe the number of Instagram followers you have has a direct effect (10% in London)
Time for change
The research shows that there is a real opportunity to better educate young people on their credit scores – and the earlier this is done, the better.
According to the research, more than half of British young adults do not check their credit scores until the age of 22 or above, whilst 28% have never checked at all (22% in London). When asked about the first-time they had heard of a credit score, just one quarter (24%, 27% in London) of Millennials cited school as the source of their knowledge. In fact, 37% only first learned about credit scores when they came to apply for credit or a loan (38% in London), and 1 in 10 (14%) when it came to apply for a mortgage (11% in London).
By this stage many young people could have already fallen behind the curve having had neither the knowledge nor opportunity to nurture their financial health.
Alex Rohloff, co-founder at Laybuy said, “What this research clearly shows is that Millennials are disconnected from their credit scores. By providing young people with the facts from an early age, we can make sure they get access to the opportunities they deserve at key life moments. That can mean the difference between getting a mortgage to buy a house when they want or having to wait another ten years.
“Uber and eBay scores aside, better financial education at a young age will help the next generation to safely build up credit ratings at the right time.”
Laybuy, the company that conducted the research, launched in the UK last month with footwear and apparel retailer Footasylum as its first major retail partner in the UK. The risk-free payments platform allows customers to shop now, receive their purchase straight away, and pay it off over six weekly payments with no additional charge and 0% interest.
Upon signing up, users are checked by Laybuy’s partner Experian to put correct credit limits in place to ensure shoppers are spending within their means. Users that fall behind on their payment schedule have their accounts frozen, to protect them from getting into the debt spiral. Laybuy is committed to protecting shoppers from self-imposed debt, that’s why these limitations are put in place. In fact, Laybuy’s default rate is less than 1% in New Zealand, largely due to these safeguards put in place.
The formula of six automatic weekly payments was chosen after careful study and analysis of budgeting and financial planning habits. Research recently commissioned by Laybuy and conducted by Censuswide with 2,500 consumers across the UK revealed that, on average, 31% of consumers manage their money weekly, with 29.5% of those specifically in the Millennial category choosing to budget on a weekly basis.
Laybuy is a phenomenon in its native New Zealand, following its launch just under two years ago. Already, 8% of the country’s voting population has signed up to the platform and thousands of online and physical store partnerships have been forged. Laybuy generates revenue by charging these merchants a small commission on each purchase, making the service free to use for all customers.