Loqbox's first impact report argues the UK credit system is failing millions of people before they've had a fair chance
Millions of people are being shut out of mainstream credit despite managing their money responsibly, and the label attached to them may be part of the problem.
That is the central argument of Building Better Borrowers, the first Impact Report from credit-building platform Loqbox, which calls for a fundamental rethink of how the industry identifies and supports borrowers who are not yet in the system.
The report finds that between four and five million people in the UK have little or no credit history, while more than 16 million have experienced adverse credit. A consumer survey of 2,000 UK adults, conducted by Attest last month, found that nearly two-thirds (62%) had been declined for credit, a phone contract or a rental in the last two years. More than a third (37%) of those who had been declined said they paid every bill on time.
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The problem with 'subprime'
Tom Eyre (pictured top), co-founder and chief executive of Loqbox, has been making this argument since 2009. His objection to the term subprime is not semantic, it is structural.
"Subprime is a relatively broad category that covers all manner of different issues," he told Mortgage Introducer. "Somebody who might have a fabulous credit profile in the United States but has just arrived in the UK for a new job may inadvertently end up in the subprime category. You've got somebody who's had real issues with finances in the past for a whole host of reasons, many of them may not be their own. Or you may simply have no credit history whatsoever. To bucket all of those people together with those who are having active current struggles with their finances, it's disappointing to treat all of those groups the same."
His preferred term is pre-prime – people who haven't yet had the chance to prove themselves, rather than people who have demonstrated they cannot be trusted. "Aspirationally viewing people's potential is likely to garner better results than viewing where someone is today and saying that that is it, that might be all you ever are," Eyre said.
Declan Jarvis, a Loqbox member who moved to the UK from South Africa, found he had no credit presence despite being a UK citizen with no history of debt. The challenge is one brokers working with foreign nationals and skilled worker visa holders will recognise – an overseas credit history that simply does not transfer. "Every time I checked, it just said I didn't exist. I literally live here, but the system refused to acknowledge me," Jarvis said. "When I couldn't pass a credit check for a flat, it suddenly felt really stressful, because I knew it would only get harder when it came to a car or a home. You assume if you're sensible with money, it'll all work itself out. It doesn't."
The cost of getting started
The route most commonly recommended to people in this position is a credit builder card. The report finds that credit builder cards average around 36% APR – nearly double the 18.9% available on student cards. Almost half (49%) of UK adults have taken out credit they didn't need purely to build their score, and almost half of those (48%) struggled to repay it.
Eyre is blunt about how this came about. "Credit building cards are not really credit building cards, they are subprime credit cards," he said. "It is utterly perverse that the products we give to sometimes the most vulnerable and sometimes the most inexperienced members of society also happen to be the highest-cost versions of some of the most dangerous consumer finance products we've ever created."
What the data shows
Building Better Borrowers draws on analysis of more than 291,000 members tracked across up to 24 months from sign-up between 2022 and 2024, compared against a control group of more than 300,000 comparable consumers who had not used the platform. Members who paid consistently for 12 months, and did not miss payments elsewhere, saw their credit score rise by around 73 points on average. The control group saw no increase over the same period.
Credit card holding among members who were new to credit rose from 15% to over 46% during the study period, against a far smaller increase – from 22% to 29% – among the control group. Average balances remained broadly stable at around £450, suggesting members were accessing mainstream products without accumulating higher debt loads.
The finding most directly relevant to the mortgage market concerns thin-file consumers specifically. Among Loqbox members in that group, the proportion going on to access mortgages more than doubled. "It more than doubles, which of course is a very small portion of our entire base, but that in itself is quite interesting," Eyre said.
Start the conversation earlier
The number of clients arriving with thin or adverse credit files has been rising steadily – a trend brokers across the UK will recognise. Research published in October found that nearly half of adverse credit borrowers in Scotland describe a broker as essential to securing a mortgage.
Eyre's message to brokers is direct. The credit-building conversation needs to happen long before a client is ready to apply. "If people are coming to a mortgage broker and saying I'm intending to buy a property in the next three, six, nine months, that's probably the wrong time to be looking at building a credit history," he said.
"It would be great to see the conversation around getting credit ready for a mortgage start several years before the house-buying process. If we can get people thinking about that several years in advance, we will reduce the number of people who are potentially rejected, or perhaps more importantly, reduce the average cost of borrowing for consumers who may have had mortgages that were more expensive."
A stronger credit profile can also determine how much a client can borrow, and therefore which properties are within reach. "What we also know now is that potentially means you might be able to borrow more, which means you might be able to get a different property," Eyre said. "There are a lot of knock-ons and advantages to being the most attractive, best borrower you can be when it comes to something as significant as a mortgage."
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