Being declined for credit can have negative impacts on a person’s financial, emotional, and practical well-being. Certain demographics are more likely to be declined, such as 25-44-year-olds, renters, and those with non-White ethnicities. People are declined for financial reasons like poor credit history, but also believe non-financial factors play a role. Clarity, compassion, and help finding a way forward are the key things people want when declined for credit.
There has been an increase in the number of individuals being declined for credit,with studies suggesting between 7-10% of UK adults having been declined credit.1
Credit is a valuable and essential tool in managing finances for many. Being declined credit can impact a person in a number of ways. Practically, it might mean an individual loses access to both essentials and non-essentials, and it might have an impact on an individual’s perceptions on the financial services industry as a whole.
This review brings together evidence on the topic of individuals who have been declined credit, looking at: 1) who might be declined; 2) why people are declined; 3) the impact of being declined and 4) how individuals want to be treated once declined.
Evidence shows that certain demographic segments of people are more likely to be declined credit. Ethnicity, age and housing tenure are all factors which are linked to a higher rate of being declined.
Age: 25–44-year-olds are more likely to be declined (10%) than adults aged over 55+ (2%).2
Housing tenure: renters are over twice as likely to be declined (14%) than adults with a mortgage (5%).4
Ethnicity: those with an ethnicity described as ‘other’ are more likely to be declined (16%) than other ethnicities – White (6%); Asian (5%), Black and Black British (9%).5
People can be declined credit for several reasons, typically these are financial ones such as poor credit history and existing debts. However, Financial Lives data also shows that people believe non-financial factors such as their age, health or ethnicity are factors as to why they have been declined credit.6
Interestingly, according to survey data, only ethnic minority individuals believe their ethnicity is a factor to them being declined credit. Similar sentiment is present in other evidence. For example, data shows that some ethnic minority individuals believe they get worse products or services because of their race or ethnicity,7 and other research points out that some ethnic minorities believe they are percieved as less positive than their white counterparts when using new services.8
When a person is declined credit, it can have negative financial, emotional, and practical impacts on their day-to-day lives. It could also have long-term effects on their mindset and behaviour.
After being declined, many people (57%) are able to find an alternative source of credit, while others may have to accept different terms and conditions (14%) or pay extra (9%).9 However, many others still struggle in some way, cutting back on spending, using savings, borrowing from friends or family, seeking loans from trusted providers, resorting to loans from unlicensed money lenders, or going without entirely.10
A significant proportion of people who are declined (88%) end up in arrears or take a ‘holiday’ on some essential bill.11 For some, being declined prompts them to seek debt advice, indicating they may be experiencing financial difficulty or at risk of doing so.
Being declined for credit can significantly impact an individual in multiple ways.
Emotionally: people feel worried; feel as if they have let others down; and feel isolated from the world.
Practically: people seek non-financial help from friends or family (e.g. accepting food or childcare); work overtime or get an additional job; or seek advice or guidance from charities, banks or employers.
Long-term/behaviourally: being declined may have long-term effects on an individual’s attitudes and behaviours. Some themes include:
Recent evidence shows three key elements that individuals want from providers: 1) clarity; 2) compassion and, 3) help finding a way forward.17
Did you find this review helpful? We would like to know what you think. Please contact us at [email protected] with your feedback, and any suggestions for further research or evaluation that should be included in future updates.
Elements of this thematic review were produced in collaboration with the Centre for Business in Society at Coventry University.
Coventry University and The Money and Pensions Service, Helping those who use credit to make ends meet, July 2022
Financial Conduct Authority, Financial Lives 2020 survey: the impact of coronavirus, February 2021
YouGov, Which Britons have been refused credit?, February 2021
Money and Mental Health Policy Institute, May 2018
The Money and Pensions Service, Buy Now Pay Later – the customers and MaPS’ Concerns, June 2022
Social Market Foundation, Squeezed out or opting out? Understanding ethnic differences in use of financial products and services, February 2023
The Money and Pensions Service, The University of Southampton and the University of Bristol, The intersecting impacts of mental ill-health and money problems on the financial wellbeing of people from ethnic minority communities, January 2023
