How women consumers are influencing the credit landscape

On International Women’s Day (IWD) held on March 8 this year, many of us read up on the social, economic, cultural, financial and political achievements of women across the world. This year’s IWD theme of ‘Each for Equal’ urged everyone to stand up and work towards gender equality collectively by providing equal opportunities and benefits for women across platforms and domains.

This is already taking form in the financial world, where there is a positive shift in Indian women’s credit behaviour. Their credit choices are accelerating their growth and turning life goals into reality. According to a recent study by TransUnion CIBIL in the credit landscape, the number of self-monitoring Indian women, who check their CIBIL Score and Report, jumped by 62 percent between February 2018 and December 2019. This infers that more and more women are learning about how they can use loans and credit cards to make their dreams come true.

So what is driving this change?

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Key factors in the credit landscape

While the shift in women’s credit behaviour can be attributed to socio-economic changes, banks and financial institutions have played a critical role, too. Traditionally, lenders check a consumer’s credit profile, which includes the CIBIL Score and Report, to assess loan eligibility and/or a credit card application. In recent years, the increase in women consumers joining the credit landscape and their intent to maintain a positive credit profile have worked in their favour.

As a result, more and more lenders are creating loans and credit card offerings that are specifically aimed at the woman consumer. These are adding an impetus to the Indian woman’s growing use of credit, her loan choices and her credit-awareness.

Now, the CIBIL Score and Report is a reflection of a consumer’s credit behaviour, and a positive credit profile goes a long way in getting women access to loans when they need it the most. Interestingly, the TransUnion CIBIL study shows that women boast of an average CIBIL Score of 734, which is higher than men’s average CIBIL Score of 726. This indicates that an average woman has a better credit profile than her male counterpart.

Besides lenders taking notice of this positive credit profile, the Indian government has acknowledged the rise of the credit-conscious woman consumer by introducing initiatives to boost access to loans with benefits such as reduced rates of interest. Various government-led and supported initiatives like Nidhi-Prayaas and Mudra Yojana Scheme aim to increase women entrepreneurship. This then begs the question…

How can women get more access to credit? 

With credit awareness on the rise, how can women boost their eligibility so that they are loan-ready to meet their financial goals? Here are a few key steps that they can take to ensure they create and maintain a positive credit profile.

Here’s how women can start on their credit roadmap:

· Applying for and accessing credit cards cautiously: Lenders may have various credit card offers (with cashback or credit points). But is there a need to have multiple credit cards? Check out banks’ credit cards or loan products that are designed just for women, and start with one credit card only.

· Creating a credit footprint with a consumer durable loan: Taking a consumer durable loan (at a smaller amount) can be as simple as purchasing a smartphone or washing machine on an EMI-basis. While this is a smaller EMI amount that can be easily repaid, it will create a credit footprint, and timely monthly payments will help build a positive credit profile too.

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Once a footprint has been created in the credit landscape, here is how women can maintain positive credit profiles to be loan-ready, whenever the opportunity arises:

· Paying every single credit card bill and loan EMI on time: Paying all credit dues on time, every single time can go a long way in showcasing her responsible behaviour and creating a positive credit profile.

· Being aware of the credit utilisation ratio: While a bank or lender will decide the limits on a credit card, it is recommended to keep the credit utilization to less than 30% of that limit. Keep a close watch on the credit utilization ratio.

· Maintaining a credit mix of secured and unsecured loans: Balancing unsecured loans (personal loans, consumer durables and credit cards) with secured ones (home loans, car loans or two-wheeler loans) is viewed positively by banks and lenders.

· Checking co-signed/guaranteed loan accounts: Any missed payments on a co-signed/guaranteed loan account can impact one’s credit score and profile too. Monitoring these accounts regularly ensures your credit score is not affected by someone else’s negligence.

· Monitoring one’s CIBIL Score and Report regularly: Checking the CIBIL Score and Report regularly can help ensure correct credit and personal information is reported by lenders to the credit bureau, especially because the accuracy of this information will impact the CIBIL Score and/or Report and eventually access to future credit.  

Women are making a difference in the evolving credit landscape, and a healthy credit profile goes a long way in securing access to future loans and credit cards to make their dreams a reality. With credit at her fingertips and a credit-conscious profile, there is nothing a woman cannot achieve. 

(Edited by Kanishk Singh)