Nearly seven million UK adults in the near prime sector have never checked their credit score, according to research into the near prime market, Understanding the near prime Market: The Consumer Perspective.
The near prime market comprises 10.2-13.6m UK adults who find it difficult to obtain a credit card from traditional lenders due to having a thin credit history, an adverse credit history and/or other constraints such as a low income or an inconsistent address history.
Understanding the near prime Market: The Consumer Perspective reveals that myths and misconceptions about credit persist for a substantial number of consumers in this sector of the market. According to the report, 28% of all near prime consumers are unaware that a poor credit rating can exclude them from accessing credit, while 38% believe that missing one payment means it is impossible to ever improve their credit score.
The report also finds that a significant proportion of near prime consumers are unaware of the adverse effects of a negative credit history, with 75% not realising that a poor credit rating could lead to having to pay more for items such as a mobile phone tariff, broadband services and energy bills.
The majority of near prime consumers (45%) stated that they use their card for emergencies; this was closely followed by those who said that they use it for everyday shopping (41%). In addition, 38% use their card only to purchase big ticket items such as flights or computers.
The research on attitudes towards late payments reveals that 43% of near prime consumers, over 4.2m consumers, have not missed a payment on any of their financial obligations in the past three years. Of the remaining 57% that had missed a payment in the past three years, 40% of these had missed two or fewer.
James Corcoran, CEO of aqua card issuer NewDay, said: “Since the launch of our first aqua product in 2002, we have been providing credit products tailored to meet the needs of near prime consumers. The findings in this report confirm what we know from our experience; there is not a ‘one size fits all’ approach for consumers in this market sector; their needs are distinct and diverse.
“However, this research also demonstrates that too many consumers still are not aware of their credit score and its importance. For the millions of near prime consumers in the UK, having this knowledge would inevitably help them be better with credit, closing the credit gap that currently excludes millions from accessing better prices for basic goods and services. This is why we offer free credit score checking on all of our aqua products; we recognise how critical it is for consumers to understand their credit score. It is our hope that the research in this report, in conjunction with our previous reports, helps to raise the importance of addressing this issue so that more near prime consumers can responsibly access credit that best meets their needs.”