People are struggling to understand how credit works

A new survey from the UK’s leading credit-building business, Loqbox, has revealed that people in the UK are struggling to understand how credit works and what it means for their everyday lives.

At a time when the average credit score in the UK is 644 on the Equifax scale and an estimated one in ten Brits are credit invisible, the report found that a third of UK adults don’t understand basic borrowing terms. Even more concerning, one in ten are now turning to Buy Now, Pay Later (BNPL) just to pay for essentials like food and fuel.

The report found that while credit can help make big life moments more manageable, it also carries risks, especially for people who are already struggling to make ends meet.

When money is tight and options are limited, many people feel they have no choice but to borrow, without always considering how they’ll make the repayments. But confusing language, unclear terms and hidden fees in credit agreements often leave people unsure of what they’re really signing up for, and that lack of understanding can lead to debt levels that feel unmanageable. Sadly, for some of those excluded from mainstream credit, they’ve been left with no option but to go to high street loan sharks for the money they need and are at the whim of shockingly high interest rates and fees, with no legal protections.

The report also contains a survey, which was conducted in conjunction with polling firm Censuswide, offering one of the most in-depth examinations of why people borrow on credit, how they access them, and their attitudes towards managing personal finances across the UK. The Loqbox/Censuswide survey gathered 1,000 responses from across the UK, including Scotland, Wales and Northern Ireland, from young adults aged 18 to those 55 and over and across all income brackets – giving a comprehensive overview of the UK population’s appetite for credit, as well as their awareness, perceptions, decision-making, and understanding of borrowing.

Tom Eyre, Co-Founder and CEO of Loqbox, said “How we view money, and what we know about how to borrow it, can literally alter the direction of our lives. When used responsibly, credit is an incredibly powerful tool that helps people reach important milestones, whether it’s renting somewhere new, buying your first home, that dream holiday, wedding or other momentous occasion. Credit can help achieve life’s special occasions. However, it’s so important that people have the facts and the tools to help them manage this credit responsibly.

“That’s why Loqbox has produced this survey as part of our report. The key message shining through is this: when borrowing money, by empowering yourself with the knowledge to make informed lending decisions, you can access better borrowing deals, save to meet your financial ambitions and build a richer life. By improving their knowledge of credit products, people can improve their financial wellbeing, and enjoy a happier, healthier relationship with money.”