Whether you are freshly out of college 20-something or an experienced professional in your early thirties, there is one thing that connects everyone in that range- being a millennial. Millennials make up two-thirds of the humongous population of India, and are the reason why demand for goods and services has been steadily increasing. This is leading to a proportional increase in the demand for credit cards and consumer loans, resulting in a retail credit boom in the country.
As per a recent TransUnion CIBIL market survey, millennials – with a preference for credit, added to their financial goals and aspirations – are about to transform the credit landscape.
There are various motivations for millennials taking credit. The primary one is an aspiration for a better lifestyle. Next on the list is owning a vehicle. The third most important factor is family emergencies. If you are a new millennial who wants to understand how to be a good candidate for credit, here are some tips.
According to CIBIL data, approximately 39% of loans in recent times have been sanctioned to millennials. Amongst these, 38% were through credit cards, 17% were two-wheeler loans, and 16% were consumer loans.
Since you are still in the primary stage of your career, you have a longer credit lifecycle and a larger credit appetite ahead of you. According to the same survey, millennials think that a loan is the best solution for an expensive purchase. They also believe themselves to be financially aware enough to repay loans on time.
Availing credit becomes critical for a big purchase or a medical emergency. However, there are some factors that you, as a new credit user, must be conscious of.
Here are the ways in which a millennial can ensure they have a good credit profile.
Starting your credit journey
- Credit footprint: There won’t be one if you have never taken credit before. Lenders need a history to refer to for approving your loan. You can simply create it by taking a small consumer durable loan (for example, buy a gadget on EMI) that you can pay back easily.
- Apply to the bank that has your salary account: Relationships with lenders matter. Since you already have one with the bank where you hold a salary account, it’s easier to approach them for a credit card.
- Use credit responsibly: Once you start earning, you will receive several credit card offers with attractive benefits such as cashbacks and higher credit limits. But do you really need more credit cards? If you have more credit cards than you can handle, you could easily fall into a loan trap. It is advisable to use one single credit card responsibly and create a healthy credit footprint.
- A payment in time saves your credit history: Your CIBIL score is a result of your credit behaviour over the past 24 months. Every default will have a long-term effect on your credit score and your future credit prospects. So when you get your first credit card, make note of two things- the billing date and the due date. A simple phone reminder can also help you keep track of due dates and payments.
- Borrow within limits: Reaching your credit card limit and not paying back on time can have a serious negative impact on your CIBIL score. When you avail credit, you need to be mindful of usage limits. The ideal range is upto 50% of your usage limit, unless a genuine emergency requires you to avail more.
While these tips will surely build up your credit profile, it is also essential to keep track of your CIBIL score and CIBIL report regularly. Each time you take a loan, your credit footprint will be affected and it will determine your future credit availability. The more often you check your credit score and credit history as well as other details, the better. Building a good credit profile is important, so get started on building one soon. However, it also takes time to get there so don’t forget to be patient.Click here to check your latest CIBIL Score for free.