Creditspring launches new credit builder product to support millions of near-prime borrowers across UK

By Edlyn Cardoza

Subscription loan provider, Creditspring, launches Step, a new credit builder product that helps members gradually improve their credit score without running the risk of incurring further debt. With new Creditspring research finding that over a quarter (28%) of 18–34-year-olds are unaware of how to improve their credit score, young borrowers are set to benefit from this accessible, easy-to-use solution.

Step, which is the industry’s first credit builder product where the issuer takes on risk through loans borrowed, offers members a small, no-interest loan in exchange for a fixed monthly fee, with an individual’s permission, shares information on members’ borrowing data with credit rating agencies to help people build their credit score in a low-risk way.

The product has been launched in direct response to the rise of ‘questionable’ credit builders in the UK. People are signing up and paying monthly fees to these companies believing it will improve their access to credit, but the ‘credit score’ that these companies help improve is not even one that lenders ever see. They are preying on the confusion around credit scores and are just another example of companies tricking people who are looking for support.

Step is designed to benefit the UK’s 10-14 million near-prime borrowers whose credit files make it harder for them to access mainstream credit products. This forces many to turn to higher cost, short-term alternatives – such as payday lenders or guarantor loans – which often come with extortionate interest rates and hidden fees and charges. In fact, unaffordable credit was the source of a third of all complaints to the Financial Ombudsman Service last year and the most common issue for customers.  Difficulty repaying loans can lead to a spiral of debt, and in turn, negatively affect an individual’s credit score, leaving prospective borrowers with even fewer options the next time they need credit.

At present there is confusion and worry around credit scores, particularly among younger generations, with a third (33%) of individuals concerned that the financial impact of COVID-19 has negatively affected their credit score. For these individuals, Step provides no-interest loans, allowing customers to build their credit score to help improve their chances of being accepted for future credit – such as a mortgage – later in life. Members pay a fixed cost of £5 per month, and receive a first advance of £100, followed by a second advance of £200 over a 12-month period, with repayments reported to credit rating agencies.

Neil Kadagathur, Co-Founder and CEO of Creditspring, comments: “Step offers our members an accessible and affordable method of building their credit profile, with no hidden charges to contend with. We want to empower near-prime borrowers with the tools to make more informed financial decisions that contribute to better overall financial health in the long term because we think our job is done when our customers don’t need us anymore. It’s our goal to help our members get better access to mainstream, affordable credit products after using Step to improve their credit profile.”