Research from credit builder debit card, BuildMyCreditScore, reveals that declining access to credit has led to four in ten (40%) Londoners relying on borrowing money from friends or family.
As households face financial strain, a quarter (23%) of people in London have resorted to taking out additional credit to manage existing loan repayments. However, accessing credit is proving increasingly challenging, with 30% of Londoners admitting they are finding it more difficult to take out credit products.
As access to credit diminishes, Londoners are turning to riskier avenues to make ends meet, with three in ten (28%) admitting to relying on short-term, high-interest lenders—more than three times the national average (8%) as London struggles with the UK’s highest inflation rates piling additional financial pressure on households in the capital.
These financial hardships have led to a significant portion of Londoners struggling to repay loans, with 28% admitting that they have fallen into long-term debt due to borrowing money. Alarmingly, this burden falls heavily on London’s younger population, with nearly half (46%) of those aged 18 to 34 finding themselves in long-term debt after borrowing money.
Access to credit is crucial for individuals to invest in their futures, build credit scores, and navigate unforeseen financial challenges. However, without access to affordable and secure credit options, people may be forced to resort to high-cost alternatives, leading to long-term debt cycles and financial instability.
Previous research from BuildMyCreditScore revealed that over four in ten (44%) Brits want a way to build their credit score without having to take out credit products. Despite this approach traditionally being the most effective way of building credit scores, there is a clear demand for alternative options. Nearly two-thirds (64%) of young people find it unfair that individuals must risk debt by taking out a credit product to establish their credit scores in the first place.
James Lynn, CEO of BuildMyCreditScore, said, “Amid skyrocketing living costs in London, residents are struggling to make ends meet as access to credit lags behind demand. In this precarious financial landscape, loans from family and friends are a lifeline, filling the gap left by traditional lenders.
“Despite these challenging circumstances, it’s vital that Londoners are wary when taking out quick loans or informally borrowing from family and friends without a clear repayment plan. The onus needs to be on lenders to ensure credit products are transparent and more accessible and that borrowers have access to effective support which minimises the risk of debt and a long-term negative impact on credit scores.”
“People need a simple solution that helps them improve their credit scores and broaden their financial options without resorting to additional lines of credit and the risks of accumulating debt.
BuildMyCreditScore is a debit card that allows people to easily improve their creditworthiness, simply by using the card for everyday spending. This removes the risk of people who are excluded from mainstream credit being caught in a debt repayment cycle as they look to improve their situation and access more affordable credit options.
BuildMyCreditScore works instantly like a regular bank card, but payment is then collected via Direct Debit a number of days later. People are therefore able to build their credit score by demonstrating their ability to manage rolling outgoings and repay credit promptly.
BuildMyCreditScore is compatible with all major high street bank accounts and works with Experian, TransUnion, and Equifax to report key credit data. In its pilot phase, BuildMyCreditScore helped hundreds of people improve their credit score. Of the 632 users, the majority saw an increase in their credit score of between 11 and 55 points within the first three months of trialling the product.
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