Younger people are increasingly willing to use open banking to share their transaction data for access to financial products after seeing their finances hit the hardest by the pandemic.
Credit Kudos’ Borrowing Index has revealed that under 35s are three times more likely to have seen their income negatively impacted by the pandemic than older people (36 per cent compared to 13 per cent of over 55s).
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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 get a much clearer, up-to-date understanding of a borrower’s financial situation, allowing people to prove their creditworthiness and increase their chances of being accepted.
As a result, under 35s are increasingly likely to be willing to securely share their bank transaction data in this way if it could help them be accepted for a loan, rising by 21 per cent since April 2020.
Younger people are also more likely to need credit more than ever, at 26 per cent, compared to six per cent of over 55s.
However, almost one in five (18 per cent) adults aged 18 to 34 said they have been turned down for credit since March 2020, compared to just two per cent of people aged 55.
57 per cent of under 35s who have been turned down for credit since March 2020 believe it was due to a lack of information on their credit report and 58 per cent were not told why or how to improve their chances of being accepted.
“The Covid-19 crisis has put a huge amount of strain on people’s finances, with younger adults particularly impacted,” said Freddy Kelly, co-founder and chief executive at Credit Kudos.
“Financial products, like credit, can help people cope with a temporary shortfall when used responsibly, but we’ve found the younger generations are also most likely to struggle to access credit, with poor information on traditional credit reports a major cause.
“With the pandemic hitting the younger generations particularly hard, and with many younger people having a thin credit file as they haven’t borrowed much previously, many lenders have been unable to assess them using traditional credit data.
“But this doesn’t necessarily mean they can’t afford to repay. Open banking allows lenders to get a true picture of someone’s financial health and make a more informed decision and, in less than a year, our data has shown a marked increase in demand among borrowers for this technology.”
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