Lenders could be the cause of low financial confidence

The survey revealed 19% of respondents equalling 9.8 million adults, are not confident in making financial decisions. In the wake of persistent inflation, 29% of those surveyed also said they would find it difficult to cover an unexpected £100 expense, while 41% don’t understand how credit companies make lending decisions.

Only 19% said they believe lenders make it clear that the product advertised and that you are accepted for will be the one you end up with, which could lead to an unwelcome surprise when the paperwork comes through, while a small but still significant percentage of 17% wrongly believe seeking debt advice will negatively affect their credit score.

According to YouGOv 11 million people – an increase of 3.1 million in six months – are currently struggling to keep up with bills and credit agreements, while 5.6 million people missed payments three or more times in six months. The mistaken belief that seeking debt help affects a persons credit score, could lead to missed payments which can stay on their record for up to six years.

The lack of financial confidence was higher in the 18-24 age group at 31%, and moreso  among women than men 21% vs 16%  and the unemployed at 31%.

Separate research from the FCA found just 42% of all adults have confidence in the financial services industry, with only 35% agreeing that firms are honest and transparent. This lack of confidence increases for the vulnerable, and over-indebted.

Alastair Douglas, CEO of TotallyMoney comments, “Inflation is piling pressure on people’s finances, and millions are struggling to manage their money with confidence. They’re missing payments, and with little support available elsewhere, many more are turning to credit to help cover the increased cost of living.

“However, customers don’t know what the information in their credit report means, how banks choose who to lend to, or why they might receive a different offer to the one they applied for. Missed payments, rejected applications and credit confusion can have a long-term impact on people’s financial wellbeing, forcing them to turn to high cost and unregulated borrowing.

“The industry needs to be proactive in its approach. It’s kept people in the dark for too long, when they should know what their data means, and how it’s used. They should know how best to apply for products without impacting their credit file, or why a lender has rejected them. We need to build trust, improve transparency, and provide people with the information they need to create financial momentum.

“Our focus is on the UK’s 20 million adults who find themselves under-served by the financial services industry. The free TotallyMoney app puts people in control of their own personal data so it works for them, not against them and provides personalised plans and products to help them unlock a life of more choices.”