More than half (54 per cent) of young people, aged 18-34, think the current credit score system is fundamentally flawed. This is according to new research from MyLifeKit, a new company which has launched in the ‘AI for Life’ space.
What’s more, 44 per cent of all other respondents, aged 35 and older, also agreed that credit scores are flawed, contributing to an average of 46 per cent of the total respondents who agree that the current credit score system does not work.
The data, which was based on a poll of 2,000 British consumers, via independent polling agency Censuswide, also conducted analysis into respondents’ justifications for this belief. 39 per cent of people felt that it’s unfair that credit scores condemn them for poor financial decisions made in the past, often up to five years ago.
Furthermore, 38 per cent also believe that credit scores do not accurately represent their lifestyle or livelihood, and 34 per cent stated that it does not provide an accurate overview of a person’s credit worthiness. 36 per cent even cited the fact that you receive a poor credit score if you have limited credit history as a reason the credit score system should be considered flawed.
Interestingly, one third (35 per cent) regularly check their credit score and work to improve it. This figure increases dramatically between the age group of 25–34-year-olds, with 45 per cent checking it regularly. The most apathetic groups were those between the ages of 18-24 and 45 plus with only 31 per cent each checking their score regularly.
In contrast to individuals checking their score regularly, 32 per cent agreed that they will only check their credit score when they are actually planning to apply for credit, debt or a loan product or similar. When looking at how satisfied individuals are with their own credit score, 27 per cent of all people asked agreed that their credit score was not in a good state.
Interestingly, almost half (45 per cent) of all individuals feel that decision-making in the financial sectors about consumers lives is too heavily reliant on static numbers, such as credit scores.
Additionally, a quarter (25 per cent) say that the have been unfairly rejected for a credit debt or loan application in the past. This significantly increases to 34 per cent of 18–24-year-olds and 32 per cent of 25–34-year-olds. Conversely, this drops to under a sixth (13 per cent) of over 55-year-olds believing they have been rejected unfairly.
Romano Toscano, CEO & Founder of MyLifeKit commented: “In the age where people and organisations have terabytes of enriched data at their fingertips, is it really fair to judge people’s creditworthiness based purely on one metric pertaining to financial history?
“Credit scores can mean the difference between acceptance or dismissal for things as important as financial services, housing, or even mobile phone contracts, even though it is apparent that a vast fraction of the public have good reason to believe the credit score system is fundamentally flawed.
“Therefore, we must start to see a shift in how financial, healthcare and retail industries deploy enriched data to determine an individuals’ creditworthiness. Said data could include context relating to their lifestyle, health, fitness and the wider environment and economy, all of which are already being tracked and observed by consumers and businesses already.”