Indians, especially millennials, are becoming credit healthy, says Paisabazaar report

Nandita Bajpai, a Delhi-based MNC executive, uses a credit card extensively for her expenses and ensures timely bill payments. Despite her efforts, she did miss a few deadlines and exceeded her credit limit in the past, resulting in a low credit score. Thankfully, she monitored her credit score on time and took diligent steps to improve and build the score.

Like Bajpai, many Indians, especially the millennials have started understanding the impact of a low credit score and are increasingly becoming conscious about their financial well-being, taking corrective measures on time.

The drivers behind this credit-consciousness are rising aspirations, increasing awareness, change in conventional approach towards loans and more.

As per a recent ‘Making India Credit Fit’ report by Paisabazaar.com, the awareness around the credit is on the rise, stating nearly 9.25 lakh customers have improved their credit score by more than 50 points in the last six months.

Naveen Kukreja, CEO& Co-founder, Paisabazaar.com, said, “As a fintech, we believe we are uniquely placed to innovate to truly make a difference in the lives of our customers, through meaningful and relevant innovations. Over the last five years, we have seen millions of our consumers suffer due to poor credit score. Our credit awareness initiative is aimed to make India credit aware and financially healthy, through good credit behaviour.”

The report threw some interesting facts. Here’s a broader look:

1 )Shift from traditional ideology

The mindsets have changed and youth no longer view loans as an emergency option. The aspirational class now wants to explore, go on exotic holidays, buy luxury items, etc., and they don’t shy away from taking loans for such personal needs. As per the Paisabazaar report, the average age of the first loan taken for people born in 1970 was 38. Cut to the millennial age, the average age loan taken by consumers born in 1985 stands at only 27.

Moreover, around 74% of customers who took credit report from Paisabazaar.com were less than 38 years of age, and 61% of these young customers were credit healthy, with credit score of over 750.

This shift to ‘consume first and pay over time’ from ‘save first’ philosophy has been led by financially responsible millennials who are accessing credit for both their aspirational and life-goal needs.

Sujata Ahlawat, VP and Head, Direct-to-Consumer Interactive, TransUnion CIBIL, said, “Indian consumers are not only learning about how their financial decisions can impact their credit score, but also how a high score is a critical influencer in getting access to funds when they need it the most and at favourable interest rates. However, checking their score once isn’t enough, and we see consumers increasingly monitoring their CIBIL scores regularly to ensure they are loan-ready to leverage lucrative offers.”

2) Tech-led innovation and awareness

Fintechs are leveraging emerging technologies to inform and educate millennials, working professionals, self-employed and small and medium businesses in metros and Tier-II and Tier-III cities about the importance and impact of credit score.

Companies such as Paisabazaar.com have taken initiatives to help consumers check and compare their scores from multiple bureaus, conveniently track the score through Whatsapp, Amazon Alexa, Google Assistant and other platforms, get personalized and most-suited loans and credit card offers and build their score through a specialized credit advisory service.

The efforts saw a boost in self-employed category and 38% of customers who took credit report from Paisabazaar.com were self-employed with 78% of them being MSMEs.

3) Awareness in more Indian cities

It is noteworthy that the awareness in cities and towns is on the rise. While majority of the credit aware customers were from the metro cities, the ‘Making India Credit Fit’ credit report revealed that over the last two years, customers from outside the top 10 cities such as Delhi-NCR, Mumbai, Kolkata, Bengaluru, Chennai, etc., are becoming more credit aware.

Today, 54% of customers who take their credit report from Paisabazaar come from outside the top 10 cities, a nearly 40% jump in a year. Over the next five years, this rise in credit awareness, coupled with the continuing smartphone and internet boom, would enable a significant impact on the penetration of formal credit products in India, especially in the Tier 2 and 3 cities and towns.

4) More options for ‘New to Credit’ category

Traditionally, lenders were sceptical to disburse loans to individuals who were new to credit or had no credit history. But, times have changed and so has the outlook. Many new-age products having alternate underwriting models have been introduced to cater to this population.

A large proportion of these customers have started opting for short term personal loans offered by digital lenders and fintechs using alternate data like utility bills, mobile usage etc. This helps them not only meet their impending financial needs, but also begin building their credit profile.

Hence, young India is getting credit healthy and responsible, which is a healthy financial habit.

To download Paisabazaar’s ‘Making India Credit Fit’ report click the link below.

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