PROBLEM DEBT IN SCOTLAND
We’re calling on Scotland’s political parties to prioritise financial security.
Our Scottish election manifesto sets out actions to:
– Ensure room to repay council tax
– Tackle the energy debt crisis
– Rebuild financial resilience
– Address economic abuse
– Deal with problem debt
Read more:
https://stepchange.org/policy-and-research/parliament/scotland-policy-asks.aspx
We’re calling on Scotland’s political parties to prioritise financial security. Our Scottish election manifesto sets out actions to:
– Ensure room to repay council tax
– Tackle the energy debt crisis
– Rebuild financial resilience
– Address economic abuse
– Deal with problem debt
Read more:
https://stepchange.org/policy-and-research/parliament/scotland-policy-asks.aspx
New research from the Centre for Responsible Credit shows how concerns around credit scores can prevent people in financial difficulty from seeking help and should be viewed as one aspect of financial health, not the entirety.
Stats from the report show that:
“Your latest credit score is ready.” It’s a familiar email or app notification from credit score providers such as ClearScore, Credit Karma and Experian.
But it’s part of a marketing culture that could be encouraging low-to-middle income (LMI) borrowers to take on unaffordable credit and prioritise actions that maintain good scores over spending on essentials such as food and heating.
Our new report, Good Score, Empty Cupboard: The credit score trap forcing households to cut spending on essentials explores the role of credit reporting and scoring in detail, finding a third of LMI borrowers have “cut back on day-to-day expenses to preserve” their credit scores.
That is why we are now calling on the newly created Credit Information Governance Body and the Financial Conduct Authority to work with the credit scoring industry and consumer agencies to set standards for marketing dashboards. It’s one of five recommendations set out in this latest report, the second phase of our research in this area.
The first phase, published in July 2025, comprised qualitative interviews with thirty LMI borrowers. The interviews indicated there is a group of people who are highly sensitive to their credit scores, checking these on a frequent basis.
The frequent checking of scores seems to be encouraged by the many e-mails and app notifications that borrowers receive from credit score providers. When they respond to these and visit their credit score dashboards, they are often exposed to marketing offers for further credit.
Worryingly many participants felt that the best way to improve their credit scores was by taking out more credit and using it regularly. Many were also prepared to make considerable sacrifices to preserve their scores.
The scale of the problem
The second phase of our research involved a large-scale, representative, survey of more than 3,400 LMI adults in Great Britain; conducted on our behalf by Walnut Unlimited. Three-quarters of survey respondents used some form of credit (credit cards, Buy Now Pay Later, overdrafts or personal loans) with 40% using it to pay for daily expenses such as food and bills.
Most LMI borrowers check their credit scores at least once per month. Just under one fifth (18%) check their scores at least once per week, and an additional 15% do so more than once per month. A further fifth (21%) check their scores monthly.
When they do so, many enter on-line market places where they receive offers of further credit that may not be appropriate. Our survey indicates that over half (55%) of all survey respondents had received suggestions or offers for credit products from their credit score provider. Half of those (49%) felt that the offers they received encouraged them to take on more credit than they could afford, and over a quarter of (28%) reported feeling pressured to accept the offers that were made to them.
Nearly half (43%) of those being prompted to take up offers of credit by their score providers act on the suggestions they receive, but in many cases this results in financial distress within six months.
Around one in five saw their overall level of debt increase, and the same proportion (21%) experienced stress or anxiety. 18% struggled to make the repayments. 18% also cut back their spending on essentials, while 14% had to borrow more to cover the repayments, and around one in ten missed payments or defaulted.
And yet, alarmingly, three-quarters of borrowers said they would not ask for help from their lender. That’s because most people are unsure whether seeking advice or help will harm their credit score.
A disciplinary effect
Our survey also found clear evidence of a disciplinary effect, with one third (32%, equivalent to 6.3 million adults aged over 18) of all LMI borrowers telling us they have “cut back on day-to-day expenses to preserve” their credit scores.
This rises to 45% of borrowers who are using credit specifically to improve their scores, and to 55% of borrowers using credit to pay off other debts.
We also found a statistically significant relationship between the likelihood of cutting back on essentials to preserve scores and the frequency of score checking.
After controlling for age, housing tenure and incomes, over half (52%) of those checking their score more than once per week have cut back on essentials to preserve their score, as have 45% of those checking their score at least at few times per month.
Actions needed
To address the harms our study exposes, we are calling on Financial Conduct Authority, Credit Information Governance Body and credit score providers to ethically re-design, test, and set standards for credit score dashboards and their marketing.
This needs to include a review of dashboard messaging, so that providers don’t promote credit to people already showing signs of financial difficulties. Dashboards should make it clear that maintaining credit scores should not come at the expense of meeting basic needs.
More is also needed to encourage forbearance requests and debt advice seeking by ensuring dashboards proactively identify borrowers in financial difficulties and link these to independent advice and support, and there is a need to limit push notifications and dashboard marketing, to prevent borrowers from focusing on marginal score changes, and only allowing notifications when underlying credit report information has significantly changed.
The cost-of-living crisis has shattered the finances of millions, with more than a quarter of people currently unable to cover their basic expenses. It’s time for credit score providers to take action to make sure their marketing and processes are not compounding the problem.
The full report is available here.
Responding to research from the Centre for Responsible Credit, Adam Butler, Public Policy Manager at StepChange, said: “Whilst credit scores can help people understand how lenders may see them, the reality is that they are only one element of what lenders look at when assessing creditworthiness.
“Our research shows that people in financial difficulty often delay seeking help because of worries about the impact on their credit scores.
“This deepens the harm of problem debt and can lead people to take out further credit which exacerbates their financial problems. It’s important to note that seeking free debt advice and exploring options will not have an impact on someone’s credit score.
“The Financial Conduct Authority (FCA) has required the credit information industry to set up a new governance body with stronger consumer representation and make reforms to encourage struggling borrowers to seek help early.
“We want the industry to build on these steps and ensure people can seek help when they need it without fear of punitive credit reporting. As our recent polling found that 18 million people have an outstanding unsecured credit balance of some kind, a credit information system that works well for those who are struggling is vital.”
FINANCIAL CONDUCT AUTHORITY REVIEW PUBLISHED
The Financial Conduct Authority’s review of certain types of credit builder products found little evidence that they are effective for most consumers.
FCA want consumers to be able to make informed decisions so that they can navigate their financial lives.
That’s why we carried out work to understand how some credit builder products operate and have been working with firms and credit reference agencies (CRAs) to drive improvements in the market.
Here we explain the work we’ve done, and where consumers can access useful information on improving credit profiles, such as via MoneyHelperLink (external)
What we looked at
Credit builder products claim to help you build a record of making payments, which could improve your credit history and score.
Our review focused on specific credit builder products that simply report your regular payments to CRAs with the sole aim of helping you ‘build’ your credit score or history.
These products typically do not involve regulated credit. But because they are closely linked to the wider credit market and tend to be marketed to people who have little or no credit history, we looked at how they affect consumers.
We didn’t look at other products or features often described as credit builders like low-limit credit cards, rent reporting services, or services which simply explain how your credit file works.
Our key findings
Our work
Based on our feedback, 5 firms have chosen to stop offering this type of credit builder product. Others have changed their products, business models and marketing materials.
We continue to work with firms offering these products as we decide whether we should take further action.
We’ve engaged with CRAs on new data reporting guidance to ensure that only appropriate information is reported that accurately reflects repayment performance.
What to consider as a consumer
There’s little proof that these products will help improve your credit score or make it easier to get affordable credit.
Think carefully about whether these products fit your needs and are worth the cost.
For more information on improving your credit profile, like tips on low-limit credit cards, or for free debt advice if you’re having money problems, visit:
StepChange has welcomed the Financial Conduct Authority’s (FCA) review into credit builder products, and the harm that they can cause to consumers, particularly if they are struggling with debt.
Peter Tutton, Director of Policy, Research and Public Affairs at StepChange, said: “We welcome the FCA’s new review into credit builder products.
People who have a poor credit history or are new to credit may choose to use these products explicitly to build their credit score. Advertising of these types of products can exaggerate the benefits of having a good credit score, and lead consumers to believe it will help them get access to credit or other financial services.
“Our research finds people in financial difficulty delay seeking help because of worries about their credit scores – almost half (45%) of people finding it difficult to keep up with credit repayments were offered more credit. This increases harm and makes debt problems worse.
“The reality is that credit scores are only one element of what lenders look at when assessing credit worthiness. We support the FCA’s wider work as part of the Credit Information Market Study that lenders should report forbearance arrangements more positively which would make people more confident to get better and earlier help with their debts.
“We need to ensure the credit information system is not used to push people further into harmful debt.”
Services that support people struggling with debt on their energy bills have been expanded after receiving almost £1 million of additional funding.
This will help organisations to provide money and debt advice to customers, increase capacity through additional training for staff, and enhance engagement with energy suppliers to facilitate fairer and more sustainable debt solutions for customers.
£944,000 has been allocated equally between Citizens Advice Scotland, StepChange Debt Charity and Advice Direct Scotland.
Housing Secretary Màiri McAllan announced the investment at the beginning of Talk Money Week, an annual campaign from the Money and Pensions Service to increase awareness of personal finance issues.
Ms McAllan said: “In an energy rich country like Scotland, nobody should be struggling to pay their energy bills.
“The UK Government said energy bills were going to come down, but they’ve only gone up and could rise further still.
“That underlines the importance of our investment in services that support those who are struggling the most.
“Advice agencies like Citizens Advice Scotland, Stepchange and Advice Direct Scotland, play a vital role delivering this support and we will continue to work closely with them to ease the burden of the cost of living and help those who need it.”
The funding is part of a £16.9 million package being invested in free income maximisation and debt advice.
Sharon Bell, Head of StepChange Debt Charity Scotland, commented: “Scotland is facing an energy debt crisis and more and more clients are coming to StepChange Debt Charity Scotland with spiralling energy arrears.
“We welcome this additional funding from the Scottish Government which is allowing us to provide vital energy debt advice to more people across Scotland right when it is needed the most.”
Talk Money Week runs from November 3 to November 7.
If you are struggling with problem debt and worried about how best to deal with it, you’re not alone. That’s the message from a new Scottish Government campaign, encouraging people in Edinburgh to get the help they need and are entitled to get their finances back on track.
Problem debt could come from credit card debt that has gotten out of control, overdraft fees or from unpaid bills. Anyone can run into debt problems, and it can quickly spiral to unaffordable costs. But there is a wide range of trusted organisations, free support and advice available to help Edinburgh locals take control of their debt and ease their money worries.
As a starting point to living and enjoying a healthier financial lifestyle, you can follow seven simple top tips and useful guides from the Scottish Government’s partners.
A new website, moneysupport.scot, from the Scottish Government includes information and links to free and impartial debt advice to help people take control and live a healthier financial life. There’s also information on other financial matters such as affordable credit options and eligibility for benefits.
Sharon Bell, Head of StepChange, said: “With many Scots worried about money and debt problems, it’s important that people don’t fear seeking support before they reach financial crisis.
“By getting in touch with us, it’s a small and vital first step to getting your finances back on track and dealing with your worries. We can help people access and utilise the resources they are entitled to and will be there to support for as long as they need.
“StepChange is proud to partner with the Scottish Government on this campaign to raise awareness of the free support and advice available. Our skilled team of debt experts will help people achieve long-term financial control.”
DEBT ADVICE TOP TIPS
It’s hard facing up to problem debt and it’s easy for it to spiral. From missing payments to not opening bills or checking your statements you can quickly run into trouble and be left feeling anxious. By facing up to the facts, you can get the support you need and take back control of your finances. Go to moneysupport.scot for help.
The sooner you ask for help, the sooner you can work towards tackling your debt and easing your money worries. Free and impartial advice is available from a range of trusted sources including Christians Against Poverty (CAP) who can advise you on practical solutions to a healthier financial life.
Everyone’s circumstances are different. By calling StepChange, you’ll be put straight through to an expert money advisor, who can provide free debt advice tailored specifically to your needs and they will be there for as long as you need them.
Creating a budget detailing your income and what you spend each month, let’s you clearly track your finances. National Debtline’s, StepChange’s and Business Debtline all have useful planners available to download for free.
Understanding your ‘priority debts’ including rent can stop you facing serious consequences like being evicted. Citizens Advice Scotland has a useful guide to identify different types of debt and which ones you need to handle first.
Various schemes can assist you in paying back your debt with step-by-step assistance available from StepChange and National Debtline.
If your circumstances change such as losing your job, temporary solutions are in place to help manage your debt in the short term. National Debtline offer a useful digital guide on the various schemes in place to support you in seeking the help you may be entitled to.
For local advice and support contact Granton Information Centre – telephone 0131 552 0458 or 0131 551 2459 or email info@gic.org.uk
The number of people finding it hard to keep up with bills and credit commitments has doubled since the start of the pandemic according to new research from StepChange Debt Charity.
The charity has found the proportion of people struggling is now nearly one in three (30%) GB adults – 15 million people – compared to 15% (7.5m people) who say they were struggling in March 2020.
The findings are part of a new report – Falling behind to keep up: the credit safety net and problem debt – which reveals the pandemic has further entrenched the use of consumer credit to make ends meet.
The report finds 8.6 million people in financial difficulty in Britain borrowed £26 billion to cover their basic needs in the last year. This includes 3.5 million people who have used credit to pay essential bills.
The number of people resorting to credit is expected to increase as the cost-of-living crisis pushes up the price of basic household essentials.
StepChange’s research reveals a credit market that does not always work for people in financial difficulty, with two-thirds (65%) of those in difficulty having kept up with credit repayments by missing bills, borrowing from family and friends or being forced to cut back to the point of hardship.
Despite rules designed to ensure those in financial difficulty access support, fewer than one in four of those struggling with credit repayments are in contact with their bank or credit firm.
Strikingly, half of GB adults (53%) say that they would be reluctant to seek help with financial difficulty from a bank or credit firm due to concerns about credit reporting and the anxiety and stigma of talking about financial difficulty.
The report finds that rather than access help, people struggling with debt can instead experience steps that make their situation worse. Among Stepchange clients who responded to an online survey, 26% were offered further credit after they were in financial difficulty, 35% had a payment taken they could not afford and 51% had interest added to a debt.
The lack of effective early intervention to identify and provide those in financial difficulty with a safe, fair way out of unaffordable debt is causing social harms, with 6.4 million struggling GB adults saying credit has had a negative impact on their health, relationships or ability to work in the last 12 months.
The research, based on a national survey of GB adults and an online survey of StepChange clients, highlights poor practice in the credit market such as ineffective affordability checks and automatic credit limit increases that draw financially vulnerable households into unmanageable debt.
With the cost-of-living crisis now further squeezing budgets StepChange is warning that many more people are likely to use credit to pay for essentials in the coming months. Urgent action is needed to support households to meet essential costs without resorting to credit.
The Financial Conduct Authority recently announced proposals to implement a new Consumer Duty that will require firms to focus on delivering good outcomes for consumers. StepChange is calling for the FCA to ensure the Duty changes practices that are failing consumers, including:
StepChange is also calling on the Government and the FCA to do more to provide alternatives to borrowing for households that are struggling to meet unexpected expenses, through grants via the social security system and a government-supported no interest loan scheme.
StepChange Chief Executive Phil Andrew said: “The sharp rise in the number of people struggling to meet their financial commitments should raise alarm bells across Government, banks and regulators.
“We are two years into a financially damaging pandemic and going through the sharpest cost of living increase in a generation. While consumer credit can potentially play some part in helping people navigate short-term pinch points, this must not be at the cost of their long-term financial and personal wellbeing.
“For our clients, a cost-of-living crisis is not new – for years we have been seeing a steady rise in the number of households who experience debt simply through a prolonged period of not having enough income to meet their basic needs.
“However, the number of such households looks set to grow, and in the absence of public policy intervention the risk is that such households will have no other option but to turn to borrowing in the short term, which will only exacerbate and prolong their financial difficulties.
“Those responsible for the steering us through these choppy financial waters need to be attuned to the harm many credit products, made available to people on the cusp of financial difficulty, can cause.
“The new Consumer Duty is a crucial opportunity for firms to redesign products and change practices to ensure credit does not exploit financial difficulty and those in difficulty get effective help fast.
“To resist acting is to risk a rapidly escalating debt crisis, particularly among lower income households.”
