National Finance Awareness Day is dedicated to developing financial principles and practices for a strong financial future. While the day is largely focused on saving and investing, credit health is equally important in maintaining a stable financial stature, especially during testing times.
Millennials are said to indulge in a lifestyle that requires spending a lot. Therefore, experts point out that it is essential for them to maintain a solid credit score to benefit from loans and credit cards with better conditions in the future. Usually, those with a credit score of 750 or higher are more likely to get approved for a loan, as lenders view them as more financially disciplined and those with a lower risk of credit default.
Prashanth Ranganathan, CEO of PayU Finance, explains: “Today’s youth are also inclined to save while spending. While it is encouraging that young people are showing their willingness to save, access to credit is equally important in these tumultuous times. »
Note that creditworthiness and underlying financial history can play a vital role in many financial situations throughout life. “A good credit score improves eligibility for loans and credit cards, allows for lower interest rates on loans as the risk of lender default is reduced, allows for higher credit card limits and faster loan approvals,” he adds.
It’s never too late to start building a credit history, so it’s best to start young. For young millennials and Gen Zers, Ranganathan points out that being an authorized user of their parents’ or other family members’ credit cards could be an easy way to start building credit. Experts say young people can also opt for a student credit card with modest spending limits.
Moreover, one can also adopt Buy Now Pay Later solutions like LazyPay and start a credit journey independently. Buy Now Pay Later solutions are now also offered in card form, such as LazyCard, a prepaid payment instrument backed by a line of credit.
Ranganathan explains, “A good practice for maintaining credit health is to keep the credit utilization rate below 30% of the entire available credit limit. This objective can be achieved by shifting the debt burden from one credit product to many credit products.
Along with this, people trying to improve their credit score can maintain their credit score by lowering their credit utilization rate. Additionally, adds Ranganathan, “any form of EMI loan or credit card payment should not be deferred as it may negatively impact one’s CIBIL score.”
To avoid such situations, you can make autopay payments, set reminders, and create a monthly task sheet to keep score.