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A new report from Demos finds that before Covid-19 the need for credit in the UK had grown over the past year, and notes that it is now likely to increase significantly in 2020. The impact of Covid-19 is likely to increase levels of personal debt for thousands of people, which may force more people towards payday lenders or rent-to-own shops.

The Good Credit Index 2020, supported by NewDay, a leading UK specialist financial services provider, follows the first Index from 2019 and combines publicly published data, geospatial data, and private data provided to Demos to show how the area you live in affects your ability to get affordable credit.

The Index finds that:

• Physical credit environments are improving, with many bad credit options disappearing from the high street. However, with the need for credit growing, the lack of affordable credit options in many places remains a cause for concern.
• The pattern identified in 2019 persists: small and medium-sized post-industrial towns often suffer from a combination of low credit scores, high deprivation and credit need, and a physical environment that offers too few sustainable lending options and many tempting unsustainable ones.
• Some cities have a high proportion of ‘credit invisibles’ – people with no credit score due to a thin or non-existent credit report – even where those cities otherwise score well on the Good Credit Index. These cities might have many affordable credit options, which are nevertheless out of reach for this group, consisting of young people, older people, the financially excluded, recent migrants and the financially struggling.

Following the inaugural Good Credit Index last year, Demos launched the South Yorkshire Good Credit project, a place-based initiative to improve financial health in the Sheffield City Region. Demos worked with the city region mayor, Dan Jarvis MBE, and other local stakeholders from the public, private and voluntary sectors to co-design tailored initiatives to improve the credit environment. Alongside this year’s Good Credit Index, Demos has published practical guidance to help local authority leaders and metro mayors address the financial risk in their regions. Local leaders can play a key role in bringing sectors together to tackle exclusion and build financial resilience among residents, by sharing good practice, building networks and promoting better credit options.

As well as the release of new practical guidance, Demos is also calling for the Government to:

• Speed up implementation of a No Interest Loan Scheme in response to the crisis.
• Review the Universal Credit five week wait and deductions policies to ensure that the social security system can be the intended safety net for struggling households.

Heather Williams-Taplin, Head of Major Projects at Demos and co-author of the report, said:

“Access to credit that is transparent, affordable and fair is going to be even more vital in our new post-Covid reality. As our Good Credit Index this year demonstrates, there’s still a way to go before everyone can get affordable credit when they need it, so that they aren’t pushed towards high-cost, short term credit that can have huge negative consequences.

“Our new practical guidance which shares learning from our successful South Yorkshire Good Credit Project, will hopefully provide a significant and positive step for metro mayors and local authorities to improve financial resilience in their regions.”

Dan Jarvis MBE, Mayor of the Sheffield City Region and MP for Barnsley Central has said:

“Now more than ever, people across the country are finding their finances stretched to breaking point. Without access to good credit, the most vulnerable risk being exploited by unscrupulous lenders and extortionate lending which they can least afford. It is a poverty trap that comes at a high price, both for them and for society.

“The coronavirus crisis has thrown a sharp focus on inequalities in our society – in health but also more widely. As we move into the recovery phase we risk further widening the gap between rich and poor unless we take positive action both at regional and at a national level.

“We need more than recovery: if we are going to grow an economy which is stronger, greener and fairer for all, we need a renewal – a fundamental shift to tackle the structural problems facing our country. That is why I am calling on Government to invest in a New Deal for the North by funding infrastructure and innovation; creating a green new deal to support decarbonisation, and ensuring equality and inclusion through skills, education and training.

“Metro mayors can play a key role in promoting financial inclusion as part of our economic renewal, and in rebuilding communities which are financially resilient. Rather than just return to the status quo, now is the time to build back better and develop an economy which is fairer for all, including our most financially vulnerable.”

James Jones, Head of Consumer Affairs at Experian, the consumer reporting agency who provided data for the Index, said:

“Experian is committed to helping everyone build and manage their credit report and score, and we are pleased that Experian insight has helped inform this year’s Good Credit Index. We hope this report helps inform both local and national efforts to help make sure people have access to affordable credit regardless of where they live.”

The full report can be found here.

The full Index can be found here.

The practical guidance can be found here.

NOTES TO EDITORS

The research was funded by NewDay.

Media Contact

Josh Tapper, Communications Officer, Demos  |  Email: josh.tapper@demos.co.uk

About Demos

Demos is Britain’s leading cross-party think-tank: an independent, educational charity, which produces original and innovative research.