When we think of credit scores, loans, borrowings, etc., we are prejudiced to favour men. Even today, in most Indian homes – both urban and rural – men take the financial decisions, while women handle the other tasks for the family’s running.
But, a recent report by TransUnion CIBIL™ revealed that, on average, Indian women are more creditworthy than their male counterparts. The average credit score for an Indian woman is 734. In contrast, the average score for men stands at 726, a significant 8 points lower than women.
The report also revealed that women monitor and track their credit scores more frequently compared to men. Also, the average borrowing by women has grown steadily and faster compared to men in the last six years.
This survey shows us that there is a positive shift in credit behaviour among Indian women. This brings us to the question, “are Indian women more credit conscious compared to men?”
Let’s explore the answers to this question in this post.
Key Stats that Demonstrate Changing Credit Behaviour Among Women
- The number of Indian women who track and monitor their credit score and report has increased by 62% between Feb 2018 and Dec 2019.
- 45% of women take steps to improve their credit scores after checking their CIBIL™ reports.
- 35% of women open a credit card/loan account after checking their CIBIL™ scores.
*Source: TransUnion CIBIL™
All these stats reveal that women are growing more credit conscious as their financial knowledge and interest grows. They are leveraging the power of their credit scores to accelerate growth and turn their dreams into reality.
So, what’s the reason for this change?
Key Factors Influencing the Participation of Women in the Credit Landscape
Several factors are influencing the changes in women’s credit behaviour. Besides the socio-economic changes giving women their due space, the growth and evolution of the Fintech scene also play a crucial role in driving women’s growth in the financial world.
Traditionally, lenders evaluate the credit score and scrutinise the credit report of a potential borrower before sanctioning a loan or credit card. In recent years, banks, NBFCs and other digital lenders encourage women borrowers by offering them discounted interest rates, easy loan terms and other offers.
This encourages families to take loans under the names of the women in the family or include women family members as co-applicants in loan applications. As a result, women borrowers are eager to maintain a favourable credit profile so that the terms of the loan work in their favour.
With more and more lenders creating credit cards and loans just for women consumers, women borrowers have an added incentive to maintain and improve their credit profile.
Another interesting factor to note here is that women are not just checking their credit scores more frequently. Still, women also have a better credit profile than their male counterparts, on average.
Not just banks, NBFCs and digital lenders, the Union government and state governments recognise the contribution of women to the national economy. As a result, the Indian government has introduced various loan schemes and credit lines aimed at women borrowers. This increases the access to loans for women at affordable interest rates. Some of the popular government-led loan schemes for women include the Mudra Yojana scheme, Nidhi Prayaas and more.
This then brings us to the next question,
How can women increase their credit scores?
It’s good that credit awareness is on the rise among women consumers. But, how can women boost their credit eligibility? Worry not; in this section, we list out the key steps to help women begin their successful credit journey:
#1: Start by Checking your Latest Credit Score
The first step on your credit improvement journey starts with checking your latest credit score. You can track and monitor your credit score for free on trusted sites like CreditMantri. All you have to do is provide a few key details – your mobile number, email address and PAN number. Voila, your credit score is generated within a few minutes.
The next step is to see where you stand. A score above 750 is considered excellent, and a score between 700 and 749 is deemed good. Anything lesser than that requires work to improve your scores.
#2: Apply for credit cards with caution
Today, it’s easy to be flooded with multiple credit card offers. With banks wooing women consumers, it’s easy to get carried away and apply for numerous credit cards simultaneously. This is a wrong step and can prove costly in the long run.
When you have multiple credit cards, it’s easy to get carried away with unnecessary purchases, racking up enormous credit card bills, which lead to a debt trap. It further damages your credit scores, impacting future loan eligibility.
Smart Credit Tip for Women: So, before applying for a credit card, evaluate the features and benefits to select the right card. It’s highly recommended that you start your credit journey with one card and move to more cards as you get better at handling them.
#3: Build a Credit Footprint
To build your credit score, you need a credit footprint. A credit footprint is a record of your credit journey. Besides a credit score, a short-term consumer durable loan or a small personal loan can help you build your credit history.
Take a short-term consumer durable loan to purchase a home appliance (television, washing machine) or a gadget (laptop, smartphone, etc.) By making timely repayment on this loan, you can build a positive credit profile by repaying the loan as per schedule.
Smart Credit Tip for Women: Just make sure that you take the loan for a small amount to manage the EMI within your budget.
How can women maintain good credit scores?
Once you have built your credit score, follow these tips to maintain (and further improve) it.
- Pay every loan EMI and credit card bill on time
This has the biggest impact on your credit score. By paying all credit card dues and loan EMIs on time, every single time, you showcase your responsible credit behaviour. This demonstrates that you’re committed to repaying your loans on time. It goes a long way in increasing your credit scores and building a stellar credit history.
- Keep a watch on your credit utilisation ratios
While you may have a huge limit on your credit card, it’s highly recommended that you keep credit utilisation on the card at 30% or lower. For example, if the credit limit on your card is Rs. 1 lakh, then make sure that you don’t spend more than Rs. 30,000 on the card at a time. This keeps your credit utilisation rate at 30%, which is beneficial for your credit score.
- Maintain a mix of both secured and unsecured loans
You need to have different types of credit in your profile. The right balance of secured loans (like home loans, car loans, two-wheeler loans, etc.) and unsecured loans (like consumer durables, personal loans, credit cards) is beneficial for your credit score.
- Watch out for missed EMIs on co-signed loan accounts
Missed/delayed EMIs on loan accounts where you are a co-signer/guarantor also have a massive impact on your credit score. So, make sure that any loan accounts for which you have guaranteed are paid on time. After all, you don’t want your credit scores to be impacted by someone else’s negligence.
- Monitor your credit report for errors
It’s a good habit to check your credit reports at least once in six months. Get a copy of the report from your preferred credit bureau or trusted sites like CreditMantri. Go through the information on it – check for any errors, missing credit articles, etc. Make sure to report these errors and get them rectified to avoid damaging your credit scores.
The women of today are empowered in all areas of life, including their financial wellbeing. It’s heart-warming to see that more and more Indian women are growing credit conscious. Building a healthy credit profile goes a long way in improving your access to future loans and credit cards. Use the tips listed here to create a strong credit profile, and take credit conscious actions, to transform your dreams into reality.