A study among people who live in social housing shows that family or friends are by far the preferred source from which to borrow money. This is especially in relation to funds needed to cover people’s living costs or for purchases such as white goods. A debt-shy third say they would never borrow money at all.
More than one in three (38%) people living in social housing would call on relatives and friends for extra funds, compared to only 13% who would approach their bank or building society for a credit card or loan and only 6% who would use a current account overdraft facility. A third (33%) say they would never borrow money at all. Only 2% of social housing tenants said they would use a payday loan.
With 4.8 million Britons living in social housing,the findings, from Experian’s Social Housing Tenants Study, highlight the significant levels of financial exclusion faced by many less affluent families. Compounding this exclusion, a lack of borrowing from mainstream finance providers often leaves these tenants with a very limited credit history which makes it difficult for lenders to offer them normal financial products and services. Mainstream lenders usually see these tenants as having “low credit worthiness.” The analysis helps to explain why approximately two million people use high-cost loans every year as they are unable to access any other form of credit.
To help people living in social housing get better access to affordable finance, Experian and Big Issue Invest have created a way these tenants can quickly demonstrate good credit-worthiness. The Rental Exchange is a new initiative that allows social landlords to submit information about their tenants’ rent payment history to Experian. Rental payments can then be factored into lenders’ credit decisions. In fact, three-quarters (72%) of social housing tenants’ credit scores are known to increase when rental payment data is added to their credit report.
Nearly half (47%) of social housing tenants aged 55 and over say they would never borrow money, and while the likelihood of borrowing increases among younger age groups, a fifth of tenants under the age of 34 do not have the confidence to borrow.
Although they’re more open to borrowing, young people are the most likely to borrow from family and friends rather than banks or building societies. Nearly 60% of those aged 18 to 34 would turn to family or friends for money first. A bank or building society loan or credit card was considered an option by just 9% in this age group, while only 4% would think about using an overdraft facility.
Source: Experian Press Release