Opinion: Helping people understand how credit works is essential for their financial health

To call the last 12 months challenging would be an understatement. As the effects of the Covid-19 pandemic ripple through the UK economy, income shock continues to be felt by a significant proportion of the population. Business closures, job losses and massive financial uncertainty is the reality many have faced throughout this crisis. 

The long-term impact of the pandemic is largely unknown, so it makes it extremely difficult for people to understand the best way to set up their finances to manage an uncertain future.

Getting to grips with their credit and affordability situation is a key part of this, but a lack of knowledge about how the credit system works may be stopping them improving their financial health.

That’s why we’re thrilled to be part of Credit Awareness Week, now in its fifth year, to help improve understanding about how the credit-granting system works so that people can take control of their finances and achieve their goals. 

Being part of this campaign also gives us a chance to gauge the public’s knowledge on these important issues as we re-visit our annual Credit Awareness Week survey. And this year’s findings, in the context of the Covid-19 pandemic, provide food for thought. 

The survey found that nearly half of the UK public (46%) have never checked their credit report, a number that rises to 65% among 18 to 24-year-olds, while 69% don’t know what their credit score is. 

Although at first glance these figures may seem high, it’s clear that we are heading in the right direction and making positive strides compared to previous years. In the first survey we carried out in 2017, 55% had never checked their report and 78% didn’t know their score.

But regardless of the progress we’ve made, there is much more we can do to improve. As an industry, it’s important we empower people with the knowledge to take control of their finances and understand how they can make their credit information work for them. We need to do all we can to help.

Free credit-score-improvement service Experian Boost for example, takes into consideration everyday payments to digital entertainment services, like Netflix and Spotify, and includes regular payments to things like council tax and savings.

This helps contribute to people’s overall financial image and can positively impact chances of securing credit in the future. Other initiatives include the industry-led ‘guide to credit scoring’, which aims to build understanding about credit information, how and why it is used by lenders, and what rights consumers have over the information used and shared.

Particularly during these challenging times, understanding and monitoring your credit report and score is a vital element of financial management and helps people access the best products available.

Through our Credit Awareness Week campaign, ongoing educational endeavours, and our work with the financial services industry, Experian remains committed to improving public awareness and understanding of the credit system.