UK Credit

Young people are more willing to use open banking services to obtain credit

Young people are increasingly willing to use open banking to share their transaction data in order to access financial products after seeing their finances hit hardest by the pandemic.

The Credit Kudos Loan Index found that those under 35 are three times more likely to have had their income negatively affected by the pandemic than the elderly (36% vs. 13% of those over 55).

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Credit Kudos said this fluctuation makes it difficult for lenders to make decisions without up-to-date financial information.

The credit reference agency said that open banking helps lenders have a much clearer and up-to-date understanding of a borrower’s financial situation, allowing people to prove their creditworthiness and increase their chances of be accepted.

As a result, those under 35 are increasingly willing to securely share their bank transaction data in this way if it can help them be accepted for a loan, increasing by 21% since April 2020.

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Young people are also more likely than ever to need credit, at 26%, compared to 6% among those over 55.

However, nearly one in five adults (18%) aged 18 to 34 said they had been denied credit since March 2020, compared to just 2% of those aged 55.

57% of those under 35 whose credit has been denied since March 2020 believe it is due to a lack of information on their credit report and 58% were not told why and how. improve their chances of being accepted.

Read more: LendInvest partners with Credit Kudos to improve credit checks

“The Covid-19 crisis has put enormous strain on people’s finances, with young adults being particularly affected,” said Freddy Kelly, co-founder and CEO of Credit Kudos.

“Financial products, like credit, can help people face a temporary deficit when used responsibly, but we’ve found that younger generations are also more likely to have difficulty accessing credit. , with poor information on traditional credit reports being a major cause.

“With the pandemic hitting the younger generations particularly hard, and many young people with thin credit records because they hadn’t borrowed much before, many lenders have been unable to assess them using traditional credit data.

“But that doesn’t necessarily mean they can’t afford to pay it back. Open banking allows lenders to get a true picture of a person’s financial health and make a more informed decision, and in less than a year our data has shown a marked increase in borrower demand for this technology.

Read more: Lenders define next steps in open banking

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