In an exclusive survey for Retail Banker International data analysts Equifax reveal the challenging dynamics of consumer finances that banks and lenders must address when assessing new credit applications in the UK.

The YouGov survey from Equifax focuses on how consumers use credit and what they prioritise spending their credit on.

Looking at how long respondents predict they would be able to keep up with living costs in the event of losing their job the survey found that:

– Nearly a third (32%) said 1-6 months and 1 in 10 less than a month;
– This is where family comes into its own with 45% saying they think their partner/family would pay their mortgage or rent if they lost their job.

When asked that if they were struggling financially and had to prioritise financial commitments what would come first:

– 84% of those who said they had mortgage or rent to pay would prioritise this first;
– Followed by utility bills at 23%;
– 10% said they would pay off their council tax;
– Other credit providers weren’t seen as anywhere near as important: 17% payday loans; 10% credit cards; 8% personal loans; 1% store cards;
– Despite having a car being generally perceived as important for getting to/from work and family life only 7% of those who have car finance said they would prioritise that; matched by 7% prioritising their car insurance, and
– Only 4% of those who have a mobile phone would prioritise that payment first

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The survey went on to ask how they use credit day to day. The survey found that:

– 14% to cover expenses up to pay day;
– 24% to pay unexpected bills, and
– 32% for major purchases.

It revealed that:

– Nearly half (45%) don’t pay off the balance on their credit card each month, and
– 12% only pay off the minimum stated on the bill.

According to Equifax, with credit playing such a fundamental role in UK society, access to it becomes imperative.

Martin Hagerty, head of banking & financial institutions at Equifax, said: "Lenders face a convergence of factors that make predicting consumer affordability more difficult than in past recoveries."

"The continued lack of confidence in the UK economy, together with increasing pressure on the pay packet is undoubtedly making it more difficult to assess the true extent of a consumer’s ability to afford existing and new debt commitments. And as our exclusive YouGov research demonstrates, for many consumers there is not much lee-way if they suddenly found their circumstances changing, such as losing their job.

"A greater depth of insight is required to determine consumer indebtedness and affordability in the context of the challenges presented by the current state of the UK economy. Verified income, coupled with a broader view of commitments such as household fuel bills provides that insight, leading to more accurate and reliable assessments of affordability and the capability to pinpoint customers who can safely take on new debt."

Responding to this need Equifax is leading the effort to capture declared and verified consumer income and current account credit turnover, and has developed two financial stability solutions; one for banks, the other for consumer finance organisations.

Equifax Financial Stability for Retail Banking is for those lenders who are members of Equifax’s data sharing group and share the personal current account (PCA) information they hold. Combined with core Equifax intelligence, such as credit account payment performance, new credit application activity, wealth and UK Government data on cost of living, and integrated in credit scores, Equifax Financial Stability for Retail Banking helps lenders identify customers who can safely take on new debt.

Equifax Financial Stability is for consumer financial services who do not hold personal current account data and need to be able to verify the income data provided by customers. Equifax Financial Stability instantly and reliably verifies income information provided on an application form, uniquely for individual and joint applications and aliases and linked addresses, eliminating the need for additional proof of income.