Women at credit cross-roads
The Pradhan Mantri Jan Dhan Yojana (PMJDY) programme has brought more individuals (up 24% between 2014 and 2015) into the formal financial fold than any other schemes in the past. Specifically, the financial inclusion drive has been gratifying across demographics groups, in rural areas and women (up 24% vs 14% among men). By and large, the scheme has been impactful for enabling women’s ability to access financial services.
Today, banks and financial institutions are moving towards digitization to help consumers get easy access to credit and at the same time ensure financial inclusion across the country; thus helping in a stronger integration of individuals into the ecosystem. This has also been enabling women in certain parts of the country to get easy access to credit which otherwise has been a challenge. Every individual including women go through various life scenarios and in this journey they come across cross roads which are situations they have to manage responsibly to ensure financial stability. These cross roads could be looking for an education loan, buying a home, marriage, loss of job resulting in loss of income, unexpected illness or bereavement in the family wherein access to credit is the primary need. At this time, one needs to be aware of how they can get access to credit and its impact on their credit report.
Here are some points to keep in check to ensure to manage these crossroads and be financially responsible:
#1 Get a credit report, understand your financial standing
You can access your own credit score by sourcing a credit report from an authorised credit bureau. A credit report is a compilation of your entire financial activities and when you apply for credit, your record is examined by potential lenders. Thus, accessing a credit report at regular intervals is crucial to understand how an institution would view her record. In addition, the recent directive by the Reserve Bank of India to provide access to one free full credit report including credit score once a year (Jan-Dec) to individuals will help to understand your credit profile. This can be utilised by women too and help them in their credit related decisions and at the same time understand how their profile is viewed by the financial industry.
#2 Be consistent in payments
The easiest way to define the credit history is how long you've had credit and how well you've handled it. Lenders look for consistency in payment of bills, credit cards and loan payments. A pattern of late or missed payments can make one less creditworthy.
#3 Close unused accounts
It is very important for a woman to close any unused credit accounts since lenders peg these into her credit limits. In the event of a divorce, a woman should dissolve all joint cards and accounts, establish credit independence and re-create her individual credit history.
#4 Space out credit applications
A lender may leave a credit application search footprint on your credit report each time you apply for credit. It is advisable for a woman to space out her credit applications and limit making several applications close together as this could be a sign of financial stress to lenders.
It is important for every individual to build a credit footprint to let the banking system evaluate their creditworthiness for future purposes. They must review and ensure that their credit reports up to date and accurate of their circumstances; guarding against possible frauds such as identity theft.
Contributed by Mr. Mohan Jayaraman, Managing Director, Experian Credit Bureau, India
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