New research by Experian has revealed that there are 5.8 million people in the UK who are virtually invisible to the financial system, because there is insufficient information available about their financial track record.
The campaign which is fronted by British food writer, Jack Monroe aims to raise awareness and educate consumers of the importance of ‘thickening’ your financial file. An issue close to Jack as she experienced recurring setbacks in her credit ‘journey’ repeatedly turned down for an overdraft, and often struggling to make ends meet. Although a successful author, Jack remains an ‘Invisible’ and wants others to know the steps that can be taken to help build a financial footprint.
These ‘Invisibles’, consumers with little or no financial information (sometimes referred to as those with ‘thin-files’ or ‘no-files’) can find themselves excluded from mainstream finance, or face higher costs to access the type of financial products and services that most people take for granted. This deficit of relevant financial information can also present problems for people trying to access crucial public services, owing to difficulties verifying their identity using online credit-report driven services.
More than a million (1.2m) of the group live in households in the ‘squeezed middle’ where total incomes are forecast to contract over the next few years, making them particularly vulnerable to higher borrowing costs at a time when they may need credit the most.
However, it is not just those on the poorest incomes that are affected by this issue, they come from a variety of backgrounds – including families on average incomes, middle-aged adults with low income and pre-retirement households. Young people in their 20s, renting affordable accommodation are also more likely to be financially invisible, as well as members of the older generation who may have paid off their mortgage and have limited need to borrow.
Jack Monroe, Food Writer said “Due to a lack of financial data, no one could lend me even fifty pounds. My only options were high-interest lenders or pawning my own goods. Even with a book deal, I still could not borrow from mainstream lenders. However, realising that my situation was not permanent, that there were small steps that I could take to improve my financial visibility offered me hope. Everyone should be able to access affordable financial services, I hope my story will help others to seek out the necessary advice to help build their financial visibility.”
James Jones, Head of Consumer Affairs at Experian UK&I, said “When people apply for finance, lenders review your credit report from one or more credit reference agency to help them decide whether to lend. While many people’s reports contain a wealth of relevant information on which to base this decision, almost six million people are invisible or virtually invisible and this can cause them problems.”
“The obvious impact of being financially invisible is low credit score and limited borrowing options, certainly at competitive interest rates. And it can also hamper online identity verification, making it difficult to access a wider range of services, including those provided by the public sector.”
“Unfortunately, for millions of people in the UK, a lack of information might be hampering their access to appropriate mainstream financial services, leading to a scenario where people are paying more for goods and services and have much less choice.”