Being poor is a very expensive business, those of you who are familiar with my blogs will be familiar with my frustration that we have long rewarded the rich and penalised the poor, my frustration at the cost of living v inflation, and my frustration with the barriers that exist, preventing those in adversity from helping themselves. Often making bankruptcy the most viable option to reduce outgoings AND recover on paper.

For a number of years now I have been writing about barriers to work (when you care for another and cannot physically be in two places at once, and support is inadequate), barriers to finance, which I will discuss in more detail here, and barriers to homes, which is closely linked to barriers to finance, but is also fuelled by stigma and discrimination, and could easily be resolved with correct intervention; and intervention is key. My life, somehow, seems to be consumed with delivering the message to those who ‘can’ intervene, in the hope that they care enough ‘to’ intervene.

Barriers to work and flexible working are heavily on the agenda, various organisations (including the SMBN) have delivered report after report, links here, the stats speak for themselves, the Government has childcare firmly on its agenda, and that, is a snowball that is now rolling down a hill, my contribution to the matter is done, and if they do not act on what they already have, they (this Government) never will.

So, credit scoring.

As always, I have to share the gory details of my own journey in order to explain my insight, and that would be impossible without baring all. For years I talked about barriers to finance and credit scoring, but, as, due to the cost of living, more members of society have experienced financial difficulty, this is now a big enough problem to attract mainstream attention, and this week I had a meeting with James Jones, who is Experian’s Head of Consumer Affairs, who offered some fantastic insight into how credit scoring isn’t a stand alone problem, and shared some links with me, that we should all be aware of, and of course I will share these below. I will of course elaborate as we progress through the blog, but what I want to make clear from the off, is that there IS hope, but I also want to be clear, that there are serious flaws that need addressing.

I was also interviewed by Which? Money last month, thanks to Jamie Veitch, and I am co-hosting a webinar this week (Wednesday 8th March, which is International Women’s Day #IWD2023 #EmbraceEquity), with SWIG finance, who are responsible finance lenders, and proud signatories to the Investing in Women Code. The Webinar is to discuss Breaking Down the Barriers for Women in Business. You can join us here.

So, what is the issue with credit scoring? well, credit scoring is used to measure your track record of repaying your creditors, or defaulting on your payments, this data is then reported to those who use this information to decide, essentially, if you are a risk.

You can be a very honest and ethical person, with a strong work history, and access to finance when spreading the cost is often logical, or necessary. You will know this, you will also know that spreading the cost was heavily promoted in the 90’s and millennium as an incentive for store discounts; credit limits were increased and loans upsold because APR was a very lucrative business, it still is, but, we have gone a bit crazy with APR and whereas charging a little more to mitigate your risk is justifiable, charging people in hardship 1500% APR, because they do not have much money, is simply unethical, and inhumane. I remember when an employer screeched at me when I was looking at a 50% APR loan, with a guarantor, she said that I was stupid and should only be looking at 5% APR loans. I thought that 50% was good given the alternative that I had become accustomed too in difficult times, for me, 50% was a great way to consolidate and get rid of my 500% + sharks.

So how does that happen? It does not matter how honest or hard-working we are, or how financially literate we are, when life throws you into hardship, and you find yourself in adversity, you very quickly fall into deep and muddy waters, and instead of people helping you out, they (the unethical lenders and landlords) see this as a wealth opportunity for them, and they stand on your head as you desperately tread water, pushing you further into hardship. This can change, and it needs to change, and I can explain how.

Thankfully, we have some fantastic organisations working night and day to provide evidence to stand up for people and explain how they cannot afford to live, only this week the Joseph Rowntree Association [JRF] published a report on how the basic rate of #UniversalCredit isn’t enough to cover the cost of life’s essentials. You can read the full report here.

We also have the Money and Mental Health Policy Institute, founded by Martin Lewis, which aims to break the link between mental health problems and financial difficulty. Crucially, in most cases, mental health is a response, not a cause, and this is beautifully explained by Johann Hari, in his book ‘Lost Connections’ (I also covered it in my own book ‘Finding Happiness and Freeing your Spirit’ in 2016, here, but, his is better, at explaining our mental health triggers and solutions at least!

And this where I need to share my own personal details, to explain how that plays out in real life:

Rewind 12 years, I was married, a home-owner, two cars, two cats, two full time jobs, socially accepted, and good enough on paper for every store to tell me on check out, that I would be mad not to sign up for an account there and then to get 20% discount AND pay later instead of there and then. I was sold, and perhaps, this is where I would agree that some financial education was needed into APR, in fact now we should insist on education on APR as preparing children for adult life. I digress. On paper I was APR eye candy, and as a couple, we enjoyed holidays and lived within our means in terms of salaries and repayments.

We were in rented as I rented out my house, I was an estate agent, and it made sense for us to have a cheaper flat in town close to work and social life. I then split with my husband, so of course my outgoings increased as we had separate homes to pay for on top of financial commitments. I then went on to (as a 35 year old thinking my eggs were numbered) start a family on my own, I was confident that I could manage financially, as a landlady, and employee, and with a very naïve view that childcare would simply cover that. I wasn’t too concerned as my employer was family friendly, she dropped her children at childcare and came in and went off to get them later in the day, as did the other member of the team, and I wasn’t clock watching, I just knew that it worked and I had the freedom to be in the office until 7pm and at weekends if I wanted to, which I often was. So I began maternity confident that I could take care of my child, alone, and financially independently.

My employer sold the company whilst I was on maternity leave, and whilst my role was protected under TUPE, the flexibility and family friendly environment was not written into my contract. The new office was also located in the town centre, which made the commute, parking and short walk slightly more time consuming. As I started to arrange childcare I realised that there was around a 30 minute shortfall wherever I went. The childcare hours were rigid, and my employer absolutely refused any flexibility to leave a little earlier. This was when my world, and my credit score began to break.

I had a tenant, and I looked at selling the house, the house had reduced in value and the shortfall was a few thousand, so the mortgage company refused the £135k sale (maximum asking price achieved) and refused to convert the remaining shortfall to an unsecured loan, so the sale fell through. I knew that I could not afford to live there, and I was completely unaware that help was available for mortgage interest, and I was afraid that I could not be a responsible landlord. I had dealt with rogue landlords for years, refusing to fix boilers or leaks and I did not want to be one of them. I was happy that my tenants rent would cover the mortgage but I knew she would be vulnerable if repairs were needed. Confiding in the mortgage company, asking what I should do, I could not sell, I could not move in, what could I do? they said I should withhold the rent for a few months, it would help me short term with my new baby, and they would then ‘take charge’ of the property, which essentially meant that they would collect the rent directly and pay any repairs out of the mortgage pot. I was delighted that there was a solution and I did not hesitate to accept that course of action. It was a trick, as soon as they had charge of the property they evicted my tenant, despite her always paying her rent, and they sold it for £115k, and chased me for the other £25k. I was financially ruined overnight.

I did take them (NRAM) to the ombudsman and as I was exhausted, drained, weak and with a new-born I accepted their £100 settlement cheque, I needed food at this point, I had entered the world of benefits for the first time after a 20 year dignified career history.

Meanwhile, I was of course trying to get back into full-time work, work in sync with my skillset, but the barriers, with childcare not being in sync, proved extremely problematic, and the competition rife, who knew there were so many skilled mums (mainly) needing work with some flexibility. Weeks passed into months, and I could not believe that I was a single mum on benefits, now the reality of JRF’s earlier mentioned report, of not having enough money to cover rent, electric, gas, water, council tax, food, and any transport costs. I then began to become familiar with hate speech, assumptions of large TV’s, smoking, drinking, and crucially blame. Hate speech is rife when it comes to single mums, less so with Dad’s, there is a very different psychology of sympathy rather than blame. Over the years I have witnessed many single mums take their own lives, leaving beautiful children, thinking that was the only way, I never doubt why, I nearly went that way too, again mental health is often blamed, but mental health is often simply a response.

I was determined not to continue the path of benefits of hardship of course, I was studying law, with a long term plan to graduate, qualify, and provide a good life for my child, I also had my business on the back of the KIH Bed I designed. It was only really meant to fill a gap in the market, but as work door after work door closed, enterprise seemed like a possible way out, and so I focused on studying, growing my business, and of course always behind the scenes looking to get back into the stability and autonomy of a pay cheque. I was working, but very low skilled and low paid work, and for less hours than I was willing or able to work, but that we have covered in detail.

I was untrustworthy on paper, I tried to apply for business finance, for loans to help me get by, and of course for jobs, but because of my credit score, everybody declined to help me. That said, since talking to James, I have clarity that each lender still has the autonomy to choose at which point the credit score impacts their decision. Which is interesting, as I have also had meetings with mainstream banks who promote supporting women in business, but who actually only support women who have a certain credit score, which they could revisit. In a recent meeting with one of these banks, I was told that the credit score was not something they could do anything about, but it seems they can, decide how to use this measure, internally,

Guess who would help me, the sharks, the legal sharks, the ones that are somehow regulated but then charge unethical extortionate and inhumane rates. I knew that I was in hardship, as did they, but you have to get by somehow when you are in negative income, and I did not borrow with a guilty mind, I was working towards top 10%, I was studying every day, promoting my business, and looking for work in line with my skillset that would just afford some flexibility to get my daughter before childcare closed. It was harder than I ever imagined to achieve in reality, and so more time passed, APR grew, bailiffs came, I thought about ending it all.

But then I was okay, I was (despite barriers to LPC due to presenteeism) working freelance as a paralegal, I was selling KIH Beds, I was working more for employers too, as it was a little bit easier when school started (but 13 weeks closure v 4 weeks holiday still proved a professional match made in hell). It was only because of responsible finance, namely Frederick’s Foundation initially, that I had my first offering of help out of deep water. At this point I needed consolidation, I needed to pay off the sharks, reduce my outgoings to create some disposable income, and continue to grow business and rebuild my life. But I could not consolidate, I was told to declare bankruptcy to start over, or enter into an IVA or other, but I wanted to repay everybody, I am acutely aware of the circular impact of not paying, I just needed to turn loans between 50% APR and 1,400% APR into a single 5% or even 20% APR. This is one area where I feel credit scoring holds heads under water. I was drowning. I should have been okay. I refused to declare bankruptcy when I felt I could pay everything back. Also another barrier, I wanted to be a solicitor; bankruptcy would have blocked that.

So whereas credit scoring makes sense, if we are measuring further borrowing (I would expect, and want to be declined for clothes, holidays, luxury sofa’s, etc), if we are looking to reduce our outgoings, and use it is an alternative to not paying back at all, why is bankruptcy the ‘better’ option, to actually be debt free AND have a clean credit score in six years after discharge. You suffer a lot longer if you try to pay back, but cannot consolidate, and therefore each month something is missed, it is like a revolver of choosing which four out of six creditors to pay each month, continued credit damage, that lasts longer than six years, because you want to keep paying.

And then of course we have the barriers to employment. Many industries will credit score you as part of the application process, and will not employ you if you have adverse credit. It is the greatest insult to be assumed a thief because you have experienced hardship. This is discrimination on every level and it operates on a guilty until proven innocent model. Those of us with any years behind us will know that money laundering and financial fraud is more prevalent amongst the wealthier members of society.

One of the scenarios that I needed a sensible loan was to pay a backdated council tax bill. My income fluctuated through business, and any support I was entitled to also fluctuated. It was a very unstable and vulnerable time. Whilst everything was declared, and I trusted the calculations and bills that I was presented, my council tax was actually miscalculated and backdated over a period of two years I was presented with a bill that was circa £700. As I could not (due to being unable to consolidate and reduce outgoings to create disposable income and ability to save) afford to repay this over 26 weeks, the bailiffs were sent in; in order to stop them from taking my goods away I had to make a 52 week arrangement, still unaffordable, but I was living with the basics. I prioritised them of course, even if that meant missing other payments and further damaging my credit file, but one week, after around 45 weeks, I missed a payment. I recommenced the following week immediately, but, I was in bailiff arrears. I was only a few weeks from clearing the debt when a bailiff turned up at my door. I had my young daughter in my arms and he presented me with a new charge, of over £200 for his visit, added on to my near cleared bill. I used every ounce in my body not to break down in front of my daughter, and in my calmest possible voice, I told him he had just taken my child benefit for another 3 months, because I missed one payment. He went, and I began to wonder how I could leave this life without hurting my daughter. I was trying every detail of planning how I could do that, but of course I couldn’t. I couldn’t take her, and I couldn’t leave her. I just had to suffer it, so heart-broken by humanity, so broken to the core. Trying so hard to make work work and consolidate my debt. I kind of gave up, I was existing, but empty inside, dead inside.

The CCJ’s turned into my friend, as I became weary of sharks, the court looked at my outgoings and agreed an ‘affordable’ amount. The sharks had to leave me alone. They profited greatly from my hardship, and the CCJs were for high interest and penalty charges really, the loans were repaid once, twice or three times over. I had given up on trying to get the system to work with me. But still determined to repay, I still refused bankruptcy, as I watched those close to me start to borrow again, with clean credit files as they had chosen bankruptcy when I had chosen repayments. What kind of society do we live in. Where the time and punishment is so great, for simple adverse circumstances, that could be supported and relieved in a short space of time. The credit score looks at the past, not at the person. I knew CCJ’s would further negatively impact my credit score, but bailiffs would have killed me.

And that is why Purple Shoots were my saviour. Mike called me to check up a few years ago. I don’t remember much, just how broken I was inside. He told me about Karen, and Purple Shoots. It was a blur for a few weeks, but, I was able to, with a micro loan, that looks at the person behind the credit score, give business another shot and pay a couple of things annually instead of monthly. When you are a woman in business, in adversity, even a monthly website fee can be unaffordable . A simple loan to pay these things annually, without further stretching already stretched weekly finances, gives you the lifeline to focus on generating your own income, where barriers to employment still remain. Purple Shoots literally took away those deeply disturbing thoughts, they brought me back to life, gave my daughter her mother back, body AND soul, and enabled me to grow with all I had learned, to achieve financial independence again, and comfort. What we need is the same humanity behind larger loans, and crucially behind consolidation loans that reduce outgoings, rather than increase outgoings, for business and personal.

I am still frustrated that consolidation is a challenge. Repairing a damaged credit file takes a long time, and outgoings would be significantly reduced if those loans could be rolled into one, but that is why these talks are happening, but of course we are also looking at BETTER credit scoring, recording ALL financial movements instead of just mainstream credit. One of my members has created Fintech Billdup, to share data for joint payments, making the invisible visible, and Experian are looking at measuring payments such as Netflix subscriptions to measure positive financial data on credit scores.

Of course this leads to barriers to homes. Since my home repossession I have paid circa £90,000 into another persons estate (several estates as regular moving is another consequence of adversity – another story!). Whatever a person pays into rent, they should immediately be able to transfer this to their own estate, offering stability for future generations. A mortgage isn’t really ownership, they have your rent secured on the property, and if you default they can take it back just as landlord’s can. It is only credit scoring – or at least how this data is used by mortgage lenders, and the absence of a deposit (exasperated by inability to consolidate, create disposable income and save) that locks millions of us out of paying our wages into our own homes, instead of into the estates of others.

I know that James is on it, I know that Martin is on it. I know that some Responsible Finance lenders are on it, so with that, please do not give up. Hold on another day, tread the water until those who ‘can’, ‘see’.

Vets use credit scoring, and so our animals, our four legged family are vulnerable, employers use credit scoring. With such a heavy impact, we have to make sure credit scoring, and how that is used, is done properly, humanely, and for the good of all creatures great and small!

Check out these links from James to show progress to date:

• Rental Exchange – recognise regular rent payments through credit reporting (and eventually scoring) to help level the playing field (tenants v homeowners) and support future homeownership.
• Experian Boost – using Open Banking to give consumers the opportunity to voluntarily add further regular bills and payments into their Experian Credit Score calculation
• Experian’s Affordable Loans platform – bringing credit union and CDFI loans into mainstream credit comparison
• Reducing the Credit Invisible population –to cut the number of people with either no of thin credit files, to support fairer credit assessment

This is a great start. But there is no reason to delay home ownership and consolidation, to further enable disposable income and stability, supporting those who have experienced adversity to maintain regular payments by not being overstretched on the back of adversity and high interest outgoings.

Your credit score does not define you, it defines what happened to you. We now need to make sure it does not define what happens to you.

As mentioned earlier, I am co-hosting a webinar this week for #IWD2023, with SWIG finance. The Webinar is to discuss Breaking Down the Barriers for Women in Business. You can join us here.