Opinion: We need to help people take financial control

It’s vital that consumers understand how credit and credit scores work, so they are able to take control of and improve their financial situations, secure their financial wellbeing, and play an active role in the credit economy.

Credit Awareness Week is, then, an important opportunity for us to redouble our efforts to raise levels of public understanding and engagement, while also providing an important platform to take that conversation more widely to our industry partners. It also gives us the opportunity to view progress made by previous campaigns and, because we can never be complacent, identify where further work is needed.

This year’s event is especially significant, as more people begin to struggle financially against a backdrop of the rising cost of living. This follows the pandemic, which has tested the financial resilience of millions.

At times like this it is more important than ever for people get themselves into the best possible shape to navigate the potential financial challenges ahead. However, there are still a lot of people who lack the confidence and knowledge when it comes to managing their finances. Understanding how credit works is a key part of that.

Public understanding of credit and credit scores remains relatively low. In fact, our annual consumer survey found that myths and misconceptions about credit could be holding people back from improving their overall financial health. Some obvious misconceptions stood out.

Nearly three quarters of people (73%) falsely believe a credit blacklist exists and more than one in four (27%) incorrectly think credit reference agencies decide whether people are accepted for credit cards.

People are also unfamiliar with factors that impact their credit score, with some respondents incorrectly believing that checking your own credit report (14%) and a previous occupant of their address with a poor credit history (34%) can negatively impact it.

Interestingly, the research highlighted an appetite from people looking for industry assistance in building their credit scores. For example, nearly one in five (18%) believe subscription services such as Netflix, and Spotify should be included in a credit report.

Experian Boost, a free credit-score-improvement service, allows people to do this, taking into consideration everyday payments to subscription services, as well as regular payments to things like council tax and savings. This helps contribute to people’s overall financial image and could positively impact chances of securing credit in the future.

If you compare these findings with the survey conducted for the first Credit Awareness Week in 2017 – we are making steady progress. For example, back then 80% thought a credit blacklist existed and 32% thought a credit reference agency decided the outcome of a credit card application.

Although any progress is encouraging, it’s clear there is still much work to do to continue to improve understanding, dispel the common myths, and promote consumer confidence with credit. As we emerge from the pandemic and consumers switch their focus to tackling rising living costs, credit education has never been more important.

We hope that our sixth annual Credit Awareness Week, delivered alongside our friends at Credit Strategy, will serve to further build on this important work.

To mark this year’s Credit Awareness Week campaign, we have created some exciting new educational content that aims to further improve public awareness and understanding of the credit system, as well as providing useful tips and guidance to help people manage their money with confidence.

This includes the launch of a brand-new consumer podcast called ‘Know The Score’ which features a range of industry experts discussing important personal finance topics. Guests include consumer champions from StepChange Debt Charity, Money and Pensions Service, L&C, Scotcash, Manchester Credit Union and National Numeracy. I’d encourage everyone, even those who think they know this industry inside out, to have a listen.  

To promote further understanding around credit reports and decisions, the comprehensive guide on credit information and credit scores is available online too. The guide aims to empower consumers by helping them understand the type of information lenders use when processing a credit application and why, and what rights they have in relation to their credit information.

As an industry, it’s important we work together empower people to take control of their finances and understand how they can make credit and their credit information work for them. We need to do all we can to help.