A new YouGov survey commissioned by TotallyMoney investigated consumer credit confidence and found:

• 9.8 million adults (19%) are not confident in making financial decisions
• Almost a third (29%) would find it difficult to cover an unexpected £100 expense
• Two in five (41%) don’t understand how credit companies make lending decisions
• Just one in five (19%) believe lenders make it clear that if accepted for a credit product, you may not receive the offer originally advertised
• Worryingly, 17% of people wrongly believe that seeking debt advice could negatively impact their credit score

With 20 million UK adults locked out of accessing mainstream financial products, a lack of lender transparency could be driving low consumer confidence, resulting in poor customer outcomes.

 Low confidence highlighting deeper issues

Over the past two years, persistent inflation has driven household finances to the brink, with almost one in three adults (29%) saying they would be unable to cover an unexpected £100 expense*. At the same time, 11 million people are struggling to keep up with bills and credit agreements — an increase of 3.1 million in just six months. During the same period 5.6 million people missed payments three or more times‡.

Although regulators expect lenders to provide flexibility and support to struggling borrowers, 17% of survey respondents wrongly believe that seeking debt advice could negatively impact their credit score. However, missed payments can — and they could stay on your credit file for up to six years. Ending up in mortgage arrears can also lead to court action and even property repossession. So

The research also found that one in five adults (19%) don’t feel comfortable with making financial decisions. This is higher in the 18-24 age group (31%), more common among women than men (21% vs 16%), and the unemployed (31%).

As people look to plug the growing gap between earnings and expenses, demand for credit is growing§. However, two in five adults (41%) are unsure of how credit companies decide who to lend to, and a third (31%) don’t understand credit reports. In both cases, Gen Z (18-24 year olds) index the highest, followed by 25-34 year olds.

With current regulations requiring lenders to only provide 51% of successful applicants with the advertised credit card offer, 41% of respondents feel that lenders don’t make this clear enough before applying. This means they could be in for a post-application shock when they’re given a very different product to the one they applied for.

Separate research from the FCA found just 42% of all adults have confidence in the financial services industry, with only 35% agreeing that firms are honest and transparent. This lack of confidence increases for the vulnerable, and over-indebted¶.

 Alastair Douglas, CEO of TotallyMoney comments:

“Inflation is piling pressure on people’s finances, and millions are struggling to manage their money with confidence. They’re missing payments, and with little support available elsewhere, many more are turning to credit to help cover the increased cost of living.

“However, customers don’t know what the information in their credit report means, how banks choose who to lend to, or why they might receive a different offer to the one they applied for. Missed payments, rejected applications and credit confusion can have a long term impact on people’s financial wellbeing, forcing them to turn to high cost and unregulated borrowing.

“The industry needs to be proactive in its approach. It’s kept people in the dark for too long, when they should know what their data means, and how it’s used. They should know how best to apply for products without impacting their credit file, or why a lender has rejected them. We need to build trust, improve transparency, and provide people with the information they need to create financial momentum..

“Our focus is on the UK’s 20 million adults who find themselves under-served by the financial services industry. The free TotallyMoney app puts people in control of their own personal data so it works for them, not against them and provides personalised plans and products to help them unlock a life of more choices.”