Financial inclusion is something not many of us think about, or even know about. If you have a limited credit history that will affect the deals that you are offered. It can affect anything from what you pay for mobile phones, loans, banking, mortgages, to anything you buy on credit, like kitchen appliances or cars.
For anyone excluded from the best deals, that doesn’t just make things more expensive. It can also worsen social exclusion, and lead to increasing debt problems. And over the last year Covid-19 has made millions of people’s financial situations worse.
Financial inclusion – giving more people fair and equal access to a range of financial services – has never been more important. And it is something that The Big Issue has always campaigned for and worked towards.
What does financial inclusion mean?
From making sure our micro-entrepreneur vendors can earn a legitimate living and get support selling the magazine, to setting up The Rental Exchange with Experian, we constantly strive for financial inclusion.
The Big Issue’s social investment arm, Big Issue Invest, established The Rental Exchange to tackle the financial, digital and even social exclusion challenges that tenants face. That means including rental payments in the same way that lenders and credit providers look at mortgage payments when deciding what deals people get offered.
And by improving access to training opportunities and jobs through our RORA Jobs & Training Toolkit we’re fighting to combat social exclusion.
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This week in our Financial Health campaign, we asked James Jones from Experian to explain what financial inclusion means – and what you can do to make sure you’re getting a better deal.
What causes financial exclusion?
As James points out: “People can be excluded from the financial system for a wide range of reasons. These include poverty, low financial literacy, poor product design. Or accessibility issues such as language or digital connectivity, or a poor or limited credit history.
“But there are things you can do if a limited credit history hampers your access to affordable financial products.”
From getting on the electoral register, to ensuring your name is on the bills, to considering a credit card – tips and tricks can help you get offered better deals and improve your access to fair finance.
But first there are three things everyone should do. Start by checking your credit report and score to see where you stand right now and where you need to improve.
If you happen to spot an error, notify the relevant lender or provider so this can be quickly corrected.
And, adds James: “Look for other ways to boost your score. Reducing your balances, registering to vote, and adding more relevant information can all help get your credit report and score into great shape.”
Fair finance in the real world
To show how this can work, we asked Experian’s advice on three scenarios where people might be experiencing financial hardship as a result of Covid-19.
Here’s what they advise…
A single working parent with two school age kids, who’s furloughed from their job and taken a mortgage holiday…
If you’re struggling financially because of the pandemic you’ll be largely focused on making ends meet until things improve.
The mortgage payment holiday should hopefully have provided some vital breathing space. And you can arrange similar deferrals on other financial accounts if necessary, up to a maximum of six months. As long as these deferrals are agreed with your lenders then your credit score should be protected.
Be sure to keep your lenders informed, especially if things don’t improve and you need to extend the support. Further help should be available beyond those automatic payment holidays. That could mean things such as freezing interest or refinancing to lower monthly payments. But any further payment deferrals are likely to be registered on your credit report.
If you’re really struggling to make ends meet and there’s no light at the end of the tunnel, contact one of the excellent, free debt advice providers such as StepChange, Citizens Advice or National Debtline for impartial, non-judgmental help.
A Big Issue vendor in rented accommodation. They were saving to set up a business as a market stall trader and selling online. But their savings have been eroded by pandemic. When it ends, they will need to buy stock and rent storage space…
A good credit score might come in handy once the business is up and running, opening up access to fair finance deals. So lockdown might be a good time for a spot of credit score housekeeping. Registering on the electoral roll will lift the vendor’s credit score by around 50 points with Experian. So that’s a good place to start.
If the vendor is making their own rent payments, a service such as Canopy or Credit Ladder can ensure these on-time payments are added to their credit report. That’s a way of further strengthening their financial track record.
The Big Issue recently explained what you should know on your rights as a renter here.
The vendor can regularly check their credit score for free on the Experian website or app. So that can help them track their progress and perhaps spot other ways to build a better score. This could help support their post-pandemic business plans.
Under 25 who’s in rented accommodation. They were manager in a bar that’s been closed long-term and may be facing redundancy…
Young people have been one of the hardest hit groups during the pandemic. Which is tough considering the limited delivery of financial education in schools and the knock-on impact on youngsters’ financial knowledge, skills and resilience.
As we’ve explored above, a good credit rating is a valuable asset. Taking steps to protect and, where possible, build it up now can support your longer-term goals. That might mean things such as getting a mortgage.
If redundancy is a serious possibility and you have one more existing debts, be sure to keep your lenders informed of your circumstances. They’ll want to try to help if they can. Missed payments and defaults are not good news for credit scores, so do your best to avoid these if you can.
Until the situation improves it might be a case of reducing your costs as far as possible, for example by cutting back on all but essential spending, while you hunt down a new job.
If your credit score does take a hit, check out Experian Boost. This could give your credit score a quick and easy shot in the arm. And it may help improve which financial products you can access in the future. That extends fair finance to younger people too.
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