14 December 2021
- More than one in 10 (11%) say they have been put off from applying for credit products because of the ‘fear of rejection’
- This rises among the most vulnerable, while many are forced to sell belongings or borrow off friends and family to get by
- Aro matches people to loans they are eligible for at the best possible rates
Millions of people in the UK are being put off accessing credit products because they fear a rejected application could harm their chances of a loan in the future, according to new analysis from Aro, one of the UK’s leading online consumer lending platforms.
What the data shows about fear of rejection
The FCA1 data shows that more than one in 10 (11%) of those who held at least one consumer credit product in the last 12 months had been put off by the ‘fear of rejection’. This anxiety rises among potentially vulnerable groups.2 In short, those who are struggling financially (low resilience – 42%), find it difficult to choose the most suitable financial products (low capability – 17%). Moreover, those who may have lost a job or struggle with relationship problems (negative life event – 18%) struggle more.
Over half (58%) feared the impact of a rejected application. In fact, 46% say it could damage their credit score. Nearly a third (32%) say it could affect their chances of re-applying to that provider. While many (48%) simply felt that there was no point in applying. In many cases those fears are misplaced thanks to soft credit searches, like those on offer at Aro. Soft searches allow people to check they’re likely to be eligible for a loan without damage of a declined application on their credit file.
There are also positive steps people who think their poor credit record means they cannot access a mainstream loan can take – such as registering on the
electoral roll – set out in Aro’s Credit Score Guides.
Q. What put you off applying?
- There was no point in applying: 48%.
- It could have affected my chances of applying to that provider in future: 32%.
- It could have affected my chances of getting credit elsewhere: 30%.
- It could have damaged my credit rating: 46%.
- I was unlikely to gain acceptance based on information from the lender or price comparison website: 28%.
- NET: Concern about impact: 58%.
Base: All UK adults holding one or more consumer credit or loan products now or in the last 12 months put off applying for credit. Primarily because they thought their application would earn a rejection.
The analysis also revealed that 7% of people had seen a credit application rejected over the past 12 months. The most vulnerable2 were again most likely to miss out. Those suffering loan rejections include:
- 14% of people with low financial capability
- 29% with low financial resilience and;
- over 11% who had suffered from negative life events.
As a result, over a tenth (12%) say they had sold something to get by instead of applying for a loan or as result of rejection. Meanwhile one in seven (14%) borrowed from a family or friend. In addition, 5% defaulted on another bill, loan or repayment agreement.
Creating freedom from that fear of rejection
In the past 12 months, Aro has helped millions navigate money. Additionally, we find help and access loans with some of the UK’s largest lenders through its award winning financial marketplace.
David Hendry, Chief Marketing Officer at Aro, says it’s up to the industry to ensure everybody can access borrowing products. Hendry says: “The findings show that there are a huge number of people struggling to access the credit markets, and for many the application is a daunting process.
“This is particularly true for people with thin credit files – often through no fault of their own, with circumstances like divorce or living abroad factored in – or with low financial capability. It is vital however that the financial services industry does not pull up the ladder and abandon these people to loan sharks and unregulated lenders.
“Credit plays a vital role for many people and used in an appropriate way can help reduce expensive, drawn-out debt or to improve their wider financial wellbeing.”
“Technology allows people to apply for credit with the confidence that they will be eligible for that product, but we have to make sure everyone is able to access the right tools. The industry and regulator needs to make sure that we are taking a holistic view of individuals’ credit profile through open banking, and not blocking people from loans unnecessarily.”
Notes to editor about the research
1FCA, Financial Lives survey: https://www.fca.org.uk/financial-lives-survey/resources-library
2 The FCA Financial Lives survey defines four drivers of vulnerability:
- Resilience: low ability to withstand financial or emotional shocks;
- Capability: low knowledge of financial matters or low confidence in managing money. Combined with a low capability in other relevant areas such as literacy or digital skills;
- Health: health conditions or illnesses that affect the ability to carry out day‑to‑day tasks;
- Life events: life events such as bereavement, job loss or relationship breakdown.
Aro is the UK’s go-to embedded finance partner, largest lending marketplace and one of the UK’s leading second-charge mortgage distributors. Their data-driven fintech platform matches consumers with unsecured personal loans, credit cards, mortgages and other financial products. The company partners with over 50 of the UK’s leading lenders and leading service providers, helping consumers navigate money with it’s proprietary matching platform.
Proprietary technology enables Aro to tailor products specifically for customers to give them clarity, not just choice, all by providing them only with the products they qualify for. The Group also delivers consumer financial services for high street brands, such as Argos, ASDA, The Co-Op Bank, RAC and many more.