Are you living in a credit desert?

A new report by think tank Demos has claimed that millions of consumers are now living in ‘credit deserts’.

The Good Credit Index Report says consumers are finding that high credit need is overlapping low affordable credit provision making it extremely difficult for them to access the credit they need with an affordable rate of interest.

Source of worry

Report author Sacha Hilhorst said: “For those with good credit scores and low need, it’s easy not to think about credit too much. But for millions of people, credit is a regular source of worry.

With little savings and very limited access to affordable credit, something as ordinary as a fridge breaking down can send you into a financial tailspin.

“The Good Credit Index shows this is not just a matter of personal finances, but also geography. In places where insecure contracts are the norm and payday lenders are abundant, people face very different choices from people in credit havens.”

Havens and deserts

The report splits UK consumers into two distinct groups – those living in credit havens and those in credit deserts.

Havens are defined as areas where there is low credit need and an abundance of affordable credit options. Deserts are marked by limited access to sustainable credit options and a need to borrow money.

In such areas borrowers have little choice but to turn to high cost, short term credit providers like payday lenders and pawn shops.

Perfect storm

Financial expert Michael Fotis commented: “With mounting levels of consumer debt and the ever-present risk of an economic downturn, a perfect storm is brewing.

“But for those up to their eyeballs in debt, there’s one word that really matters: affordability.


“Affordability is the responsibility all lenders have to ensure that the loans they make are affordable, be it mortgages, car finance or payday loans.

“If they’re not, customers have the right to complain, which can, and does, lead to refunds.

Affordability looks set to be the tool that holds the feet and wallets of predatory lenders to the fire.


“The Financial Conduct Authority (FCA) has just revealed plans to hold a review into credit reference agencies which lenders use to make decisions on affordability.

“In their own words the FCA said ‘poor quality credit information used by lenders could lead to harm if a consumer is ‘wrongly’ declined credit or is offered credit that is unaffordable’.”


Michael also commented on another area about which the FCA has expressed concern – the potential mistreatment of vulnerable consumers.

He said: “The rise of gig economy style working patterns will only make the challenge of financial wellbeing tougher, particularly for younger consumers.

“But rather than deliver the kind of financial products that help us live better lives, too many lenders are showing scant regard for our financial wellbeing.

After all, watching us descend deeper into the credit trap is far too profitable.”