There are over five million (5,049,129) people in the UK who are virtually invisible to the financial system, because there is insufficient information available about their financial track record, according to Experian.
These people, who Experian has dubbed “credit invisibles”, find it difficult to access mainstream financial services or have to pay a premium to do so. 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.
The credit checking firm says the UK’s ‘invisible’ population comes from a variety of backgrounds, including:
- Young people who have not yet established a credit record.
- Older people who may have either paid off their mortgage and have limited use for credit, or who have not previously relied on credit and, therefore, have no file.
- Recent immigrants (or potentially returning expats) who may have little or no credit footprint, and therefore struggle to open bank accounts and/or rent property.
Experian has also highlighted the extent of the ‘credit invisibility’ issue across the UK, with new analysis identifying the areas of the country with the greatest proportion of people at risk of financial exclusion.
The constituency affected the most by the issue is Sheffield Central with credit invisibles making up 17.7% of the population, closely followed by Edinburgh North and Leith (16.1%), Edinburgh East (15.9%), and Lancaster and Fleetwood (15.7%). It’s likely that large student populations are the reason for many of these parliamentary constituencies ranking so high, Experian said.
At the other end of the scale, Wentworth and Dearne (5.6%), Sedgefield (6.2%), Rother Valley (6.3%), Rayleigh and Wickford (6.4%) and Maldon (6.5%) are the constituencies with the lowest proportion of credit invisibles.
Jose Luiz Rossi, managing director of Experian UK&I, said: “Our latest analysis highlights just how far-reaching ‘credit invisibility’ is in the UK – it’s on all of our doorsteps, regardless of location. In this current economic climate, the consequences for millions of people could be devasting.
“Tackling this issue is a huge priority for us, and we’ve been working hard to find innovative ways to bring more people into the mainstream financial system. The solution to this challenge lies in a combination of industry-led financial education coupled with the use of new, relevant data sources which can help build out thin credit files and deliver better financial products and services for everyone.
“Open banking can help too. Experian Boost is a prime example of an open banking powered service helping people to potentially tip the balance between being marginally refused and accepted for credit.”