Young Fella's Financial Affairs - Authored Article by Kalpana Pandey

India is a young country with more than 40% of the population below the age of 25 years and over 200 million people belong to the Gen Z cohort. The Gen Z, also called the true digital natives, are considered more tech-savvy when compared to millennials. As they were raised during the period of rising impetus on technological evolution, Gen Z have the advantage of being digitally advanced. Some members of the Gen Z  have graduated college and taken up their aspirations.

The thriving educational curriculums, larger access to information and economic development have made the Gen Z grow up to be more digitally connected, smart and dynamic. Parents of most Gen Z went to college and therefore inculcated a stronger focus on education that also led to Gen Z be more aware, calculative and curious about their lives. Several surveys have indicated that their aspirations are very different from those of their parents.

The Gen Z is on a look out to be more liberal, independent and self-enriching. While they are believed to be living in the moment, they are prepared to secure themselves financially.. Here is a quick snapshot of how the young minds can achieve their financial goals with a robust credit score:

KYCs – Know your Credit score
Conversations around credit scores is less explored as the concept came into practice only in the 2000s. It is a measure of the borrower’s financial standing, behaviour and loan repayment capacity. Given that Gen Z are hyper-aware and self-driven they are not hesitant to explore considering loans and prefer self-financing their life milestones such as higher education or wedding or vacation. The blooming concept of no-cost EMIs to fund smaller ticket sized goods across e-commerce platforms has attracted many unique audiences across urban as well as rural India. This is how credit scores become essential and help lenders with all the relevant information.

Credit score is a three-digit number within the range of 300-900. The closer one’s score is to 900 the lower is the associated risk of default.  One can check their own credit score on any of the credit bureau websites. There are several fintech apps are available to access one’s own credit report and score. In addition, Gen Z can use various platforms to equip themselves with the technical knowledge on and around credit. There are ways to strengthen the credit score over a period as the process is gradual and depends on the credit history.

A stich in time saves nine
It is important for the Gen Z audience to be vary of the criteria that the lenders are evaluating them on. These include payment , defaults and delayed payments on ones’ loan or credit cards, overall loan exposure etc A couple of other parameters could be - over utilisation or high utilisation of ones’ credit card and overdraft limit, multiple loans taken within a short period of time, and nature of the defaults.

Credit scores are calculated by credit bureaus who have access to borrowers’ credit behaviour, profile and payments of their debts. Their sophisticated analytical tools and programs are constantly documenting transactions. It is therefore important to ensure that you do not have any outstanding payments. A delay in your credit card payment is likely to hamper your score and on the other hand, timely payments is sure to improve your scores.

Take a head start
While the early millennials were getting familiarised with digital money, the Gen Z have grown up in the phase of rapid digitisation. They are transacting online and through apps right from ordering meals to booking cabs. They are more confident and bolder in taking big financial decisions such as financing their MBA education with education loans. . An early credit exposure indicates that the individual is experienced in handling credit. It goes a long way to build a robust credit history and helps when one must take long-duration loans such as home loans.

A good idea would be to keep a check on your expenses and opt for a credit card with caution as the tendency to spend extra can affect your scores. It should also be noted that closing unused cards could help manage payment cycles and also save on applicable annual fees on the unused cards. With a well-planned financial cycle and regular monitoring of credit scores and credit reports, it is easy to build a healthy credit score early in life as well as maintain it.

Source: Publication: OUTLOOK MONEY | 5th March 2020