Credit refusals “impact mental health”
More than four in 10 (44%) people who have been refused credit experienced high levels of stress and 31% said it has put their family under considerable pressure in the current climate, according to a study by Credit Kudos.
The research was carried out to mark Mental Health Awareness Week (18 to 24 May).
With many people losing their jobs or being furloughed, people need access to affordable credit to help them deal with the financial difficulties posed by the Covid-19 crisis. The research found a quarter (26%) have already had to borrow to cope with the pandemic, while almost nine in 10 (86%) people expect to need to borrow more in the next three months.
But Credit Kudos found not everyone is able to access the loans they need, when they need it.
One in five (20%) people have previously struggled to get credit from a mainstream lender, while one in 10 (11%) have been turned down for some form of credit in the past year. Credit Kudos says this can have significant implications not only for people’s finances, but for their mental health.
Nearly half (44%) of people turned down for credit said it led to a great deal of stress while 40% said it had a negative impact on their mental health. A third (31%) said being turned down for credit has put their family ‘under huge pressure in the current climate’.
More than four in 10 (43%) said the reason they were turned down for credit was due to a lack of information, or inaccurate information, on their credit report.
Freddy Kelly, CEO and co-founder of Credit Kudos, says: “The traditional way of credit reporting is not fit for purpose and is preventing people accessing a vital lifeline of credit, which can lead to both mental and financial strain. At a time when our mental health is already under significant pressures from health concerns and the impact of social isolation, this is another stress people simply do not need.”
Credit Kudos works differently than traditional credit bureaus. Using open banking, it allows lenders to see information on an applicant’s bank statements to get an idea of their financial situation.
The challenger credit bureau claims this enables lenders to provide credit to even more people, including those they may have previously turned down.