From rising inflation and the cost of living crisis, to fintech apps that give the financial power back to consumers, money trends in 2023 definitely had their ups and downs. Loqbox takes a look at some of the big finance trends and credit score trends we saw in 2023 and what they mean for you.
Lots of us now use technology to invest and budget. Fintech apps and businesses are leading the way when it comes to giving us back control of our money. And that increase in autonomy seems to make some of us view finances through a more thoughtful lens. Ethical financial decision-making, like sustainable investing, is on the rise.
UK finance trends in 2023
The cost of living crisis continued to be a big money trend in 2023.
Rising living expenses became a big problem for many of us in 2021, and remained so throughout 2022. And while inflation actually fell in the last few months of 2023, it didn’t necessarily make goods any more affordable. It just meant that prices grew more slowly.
Other trends that we saw last year were cryptocurrency being more widely used and digital banking growing in popularity. These trends perhaps suggest that consumers are more engaged with their finances, and looking to find new ways to manage their money.
Let’s take a more detailed look at some of last year’s money trends:
Inflation dropped but remained high
Inflation is the percentage change in the price of consumer goods compared to the previous year. Inflation slowed between 2022 and 2023. But unfortunately, as mentioned above, it didn't mean that everything got cheaper. They just increased in price more slowly.
But what caused a rise in inflation over the last few years? The cost of living was affected by big changes across the globe. Lockdowns during the Covid-19 pandemic shot up demand for consumer goods and disrupted supply chains. In addition, the invasion of Ukraine in early 2022 made natural gas less accessible, causing energy prices to go through the roof, and disrupting the supply of grain. However, the Bank of England expects inflation rates to keep dropping in 2024.
Read more about what inflation is, and how it can affect your personal finances.
Interest rates hit rent and mortgages
In 2023, the Bank of England put up interest rates in an attempt to pull inflation back to 2%. (The idea is that if people borrow less money, people will spend less, meaning that prices will stop rising so quickly).
These high interest rates meant that our borrowing costs increased in 2023. This was especially true for those with mortgages where small percentage increases can significantly increase repayments. Rental costs have also been going up as a result, where landlords have borrowed money to buy the properties that they rent out.
UK credit score trends in 2023
So, what does all of this mean for our credit scores? And what do we have to look forward to in 2024? Well, there were some interesting things happening in the credit score landscape last year. Loqbox gets stuck into the interesting things we learned.
Credit scores are a crucial part of personal finance. Lenders look at your credit report whenever you make applications for their products. Your credit scores give you a good idea of how creditworthy you appear to potential lenders, giving you an early warning system for whether you’ll be accepted and if you can get good deals on interest rates.
New data is changing the way lenders make decisions
The details that make up your credit report are used by lenders to establish how creditworthy you are. But we all know that our finances are much more personal and nuanced than the information held in our credit reports. In 2023, some lenders began widening their focus to include more aspects of your financial management.
By using “alternative data”, lenders aim to get a more detailed picture of the way you manage your finances. This can include things like your energy bill payments, bank statements showing how you’ve covered your living costs, and even data scraped from your social media activity. This may feel intrusive, but many of us who have never missed a rent payment, and have been frustrated by lenders declining credit, could stand to benefit.
By using more detailed and nuanced data, lenders can get a more accurate picture of your borrowing habits and your current financial situation. This might help you find better products and deals, and it could be an important change in how credit reports and credit scores work in the future.
In fact, if you want your rent payments to count towards your creditworthiness and boost your credit history, you can do that now by getting started with Loqbox Rent. Whether you rent with a landlord, council, or letting agency, just tell us the date you pay your rent and the amount and we’ll let Experian know about your responsible activity, which, in turn, builds your credit history.
Financial inclusion
An exciting, and hopefully positive, change in the credit score landscape in 2023 was an increased focus on financial inclusion by looking at a wider range of financial activity and using new data sets. This way lenders can properly evaluate the creditworthiness of those of us who might have otherwise been left behind by traditional credit scoring systems.
Machine learning and credit scores
Artificial Intelligence is everywhere at the moment. Whether it’s going to save our lives with medical advancement, or put our lives in danger in a Terminator-style dystopian future, you can’t escape the big discussions around AI. But what does it mean for your credit scores and personal finances?
Machine learning algorithms can scan vast amounts of information in the blink of an eye. Some lenders are already using it to more accurately predict and understand our financial behaviour. This capability could help to refine credit scoring models and unearth patterns that older calculations would never have caught.
National average credit score in 2022 vs 2023
You might be wondering, with the financial changes over the last 12 months, how the national average credit score in 2022 compares to the average credit score in 2023?
Your credit scores are calculated by the top three credit reference agencies (CRAs) in the UK: Experian, Equifax, and TransUnion. If you don’t know your credit score, or just want to learn more, head over to 'Your credit score explained'.
Credit scores in the UK have shown a positive uptick in the last year. Average scores have seen a modest increase showing that we’re getting more careful about our finances and we’ve worked towards an overall improvement in the financial wellbeing of the people of the UK. We love to see that! But we can always do more.
2023 summary and looking towards 2024
Lenders adopted new data and updated credit scoring systems in 2023. This increased accuracy, added nuance, and improved financial inclusion. For some borrowers, this provided more choice. Not only that but financial technology, Fintech, is giving you more control.
Borrowers can greatly improve their financial prospects and options by benefiting from alternative credit improvement tools. For a fast and proven way to build your credit score, get started with Loqbox. For £2.50 per week, you can boost your credit score with Experian, Equifax and TransUnion. No credit search, no hidden fees, no hassle!
Improvements to your credit score are not guaranteed.
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