Nottingham, UK, 18 September 2015 – A study among people who live in social housing shows that family or friends are by far the preferred source from which to borrow money. This is especially in relation to funds needed to cover people’s living costs or for purchases such as white goods. A debt-shy third say they would never borrow money at all.
More than one in three (38%) people living in social housing would call on relatives and friends for extra funds, compared to only 13% who would approach their bank or building society for a credit card or loan and only 6% who would use a current account overdraft facility. A third (33%) say they would never borrow money at all. Only 2% of social housing tenants said they would use a payday loan.
With 4.8 million Britons living in social housing,the findings, from Experian’s Social Housing Tenants Study, highlight the significant levels of financial exclusion faced by many less affluent families. Compounding this exclusion, a lack of borrowing from mainstream finance providers often leaves these tenants with a very limited credit history which makes it difficult for lenders to offer them normal financial products and services. Mainstream lenders usually see these tenants as having “low credit worthiness.” The analysis helps to explain why approximately two million people use high-cost loans every year as they are unable to access any other form of credit.
To help people living in social housing get better access to affordable finance, Experian and Big Issue Invest have created a way these tenants can quickly demonstrate good credit-worthiness. The Rental Exchange is a new initiative that allows social landlords to submit information about their tenants’ rent payment history to Experian. Rental payments can then be factored into lenders’ credit decisions. In fact, three-quarters (72%) of social housing tenants’ credit scores are known to increase when rental payment data is added to their credit report.
Jonathan Westley, Managing Director of Experian’s UK&I Consumer Information Services, commented: “Only two thirds of social housing tenants would borrow from another source. This suggests that many believe the options are just not open to them, whether this is as a result of their own personal experience or the experiences of others.
“Building a credit profile is important for anyone who might want to make a large purchase such as a home or car, and even for getting better insurance quotes or access to mobile phone contracts. At Experian we’re working to educate people about credit and how to get more choice and affordable finance options. For those living in social housing, The Rental Exchange could play a major role in this.”
Jim Mullan, Group Chief Executive at the Big Issue, commented: “Social housing tenants are particularly concerned about their ability to manage financial products, such as a loan that has to be paid every month on a certain date. Or bank charges if they can’t pay on a specified day and need to delay one or two days. For that reason, many who are prepared to borrow find family and friends a more flexible alternative.
“It’s this exclusion from financial products and services that we are working to address through the Rental Exchange – it’s about giving people more options when it comes to their finances.”
Nearly half (47%) of social housing tenants aged 55 and over say they would never borrow money, and while the likelihood of borrowing increases among younger age groups, a fifth of tenants under the age of 34 do not have the confidence to borrow.
Although they’re more open to borrowing, young people are the most likely to borrow from family and friends rather than banks or building societies. Nearly 60% of those aged 18 to 34 would turn to family or friends for money first. A bank or building society loan or credit card was considered an option by just 9% in this age group, while only 4% would think about using an overdraft facility.
Experian has created a series of helpful guides to help people navigate the world of credit. For further information about the Rental Exchange or to get involved, please visit: www.experian.co.uk/rental-exchange
Note to editors:
The research was carried out on behalf of Experian by Opinium Research between 22 July and 22 August 2014 among 1,000 social housing tenants via a national telephone survey.
Financial Inclusion Commission Report: Financial Inclusion – Improving the Financial Health of the Nation – March 2015.
The Rental Exchange – Reviewing the Journey So Far. Sample (c 162,000) of the rent payment records already shared with the Rental Exchange, from social housing providers, were analysed in a simulated credit bureau environment to assess the impact the information would have on credit scores.
We are the leading global information services company, providing data and analytical tools to our clients around the world. We help businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. We also help people to check their credit report and credit score, and protect against identity theft. In 2015, we were named by Forbes magazine as one of the ‘World’s Most Innovative Companies’.
We employ approximately 17,000 people in 38 countries and our corporate headquarters are in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2015, was US$4.8 billion.
About Big Issue Invest
Big Issue Invest is the social investment arm of The Big Issue, run “by social entrepreneurs for social entrepreneurs”. We help scale up social enterprises and trading arms of charities by providing finance from £50,000 to £1,000,000. We work with enterprises that have a track record, as well as a plan to increase trading income and deliver high social impact. We are also involved in social innovation to tackle pressing problems in partnership with corporates. Our partnership with Experian is a flagship social innovation project.
For more information, visit http://www.bigissueinvest.com/