Britons Becoming More Cautious About Debt

Credit ratings agency Experian has found that people have become more cautious about taking on debt since the recession. Are you one of them?

88% of people now consider their ability to make repayments before taking on any debt, according to credit ratings agency Experian. That’s a full 5% more than in 2008.

It’s just one of many signs that people are adapting to tougher economic conditions. 81% say they are now able to make their salary last between paydays (up from 75%), while only 12% admit struggling to keep up with their payments – compared to 16% three years ago.

Greater financial awareness has helped drive this trend, along with the rising cost of living. The demise of easy credit and 100% mortgages has also caused people to think twice when making applications for loans and credit cards – not least because multiple failed applications can hurt your credit rating.

The Experian findings also show that young people have become more financially savvy, possibly because this age group is being hard hit by joblessness and potentially large increases in student loans. 18-30 year olds are significantly more reluctant to take on debt: just 15% now say they would borrow money without thinking through the implications. That’s down from 23% in 2008.

Average household debt falling

But in spite of our changing approach to credit, little impact has been made on average levels of household debt.

Charity Credit Action recently published figures showing that average household debt at the beginning of June (excluding mortgages) was £8,121, down just £23 compared to May. When you add mortgages, that figure jumps to £55,854, down £16.

As long as levels of personal debt in Britain remain high, personal finance will be high on the agenda for consumers and borrowers alike. However, continuing financial uncertainty and tougher lending terms are likely to help average debt continue to decrease in the future.

Moneyhighstreet says: “Taking on debt may not be a desirable option, but it’s still necessary for many households to manage their finances.

“One of the ways you can improve your chances of being successful when applying for a loan or credit card is to keep a sharp eye on your credit rating. Ratings agencies like Experian can help you find out what your credit rating is and give you advice on how to improve it.

“This can help you make sure that your application for a loan or credit card has a high chance of success – and that you get the best possible terms.”