The Specialist Lending Study from Pepper Money of 4,000 adults in the UK suggested that when applied to the wider population, this was greater than the 15.3 million people who were impacted by adverse credit last year and is the highest figure since the study began nine years ago.
The lender’s findings indicated that rising living costs and financial pressures could be causing more people to miss payments, fall into credit card arrears, get a county court judgment (CCJ) and/or enter debt arrangements.
Higher earners and young people impacted
Pepper Money’s study found that it was not only those on lower incomes who were affected by financial pressures, as adverse credit was becoming more common among high earners. It found that 49% of people earning more than £100,000 reported adverse credit at some stage in life, compared to 35% of those earning less than £50,000.
In the last year, 24% of six-figure earners missed a payment, compared to 9% of lower-income earners.
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The research found that graduates and postgraduates had higher rates of repayment issues and CCJs than those who did not enter higher education.
Pepper Money’s study also found that younger people were more likely to experience financial pressures, with 21% of 18-24-year-olds missing a payment in the last 12 months, compared to 3% of people aged 55 and over.
In the last three years, 28% of young adults have missed a credit card payment. The proportion of people reporting this issue falls steadily with age, impacting just 4% of adults over 55.
Pepper Money said younger people at the start of their careers and financial lives had fewer safety nets and weaker financial literacy.
Prevailing financial struggles
Pepper Money found that credit difficulties were worsening, as more than half the people impacted had experienced adverse credit in only the last three years.
Of those who missed at least one bill or repayment in the last year, 67% went on to miss more payments, up from 46% the year before.
Pepper Money said this suggested that one missed bill was no longer an isolated incident but the start of ongoing struggles.
Some 31% of respondents said the continued rising cost of living was the main reason for being in debt, and a fifth put this down to unexpected expenses like car repairs or home emergencies.
Some adults are also supporting family members and children into adulthood, often without formal financial guidance, which could be compounding the issues faced.
Pepper Money said households were probably struggling to absorb multiple rising costs rather than overspending.
Paul Adams, sales director at Pepper Money, said: “Adverse credit can impact us all – with higher earners reporting higher instances of experiencing adverse, it is increasingly a feature of modern financial life. These figures show just how close many households are to credit difficulty. Rising costs, irregular earnings and shifting borrowing habits are pushing millions to miss payments, which can lead to defaults and CCJs, including customers who have never struggled financially before.
“As adverse credit becomes more common, customers need more choice, not less. Together, brokers and specialist lenders can provide that choice and help people rebuild financial confidence, repair their credit, and continue their next step in homeownership.”
