It’s the 21st century already, we have seen it all from major price hikes to recession to a never-ending pandemic and still, only 24% of Indian adults are Financially literate. What a joke right? So it’s high time we start our financial journey before it’s too late and what better topic to start with than Credits.
What is credit?
Credit means buying something immediately and paying for it later, wherein money is essentially borrowed from banks or financial entities. Usually, Credit comes in the form of bank loans or Credit Cards. It is a smart financial tool used to buy products or services, which at the outset is paid for by the bank on the assurance that the person responsible will pay it back, possibly with an interest at the end of a fixed period of time, generally a month.
How does Credit work?
All our transaction information including the amount of money borrowed, Repayment schedule, and the service or product the credit was used for, is all recorded on our CREDIT FILE or generally known as CREDIT REPORT. In short, the Credit Report contains all the data regarding a person’s past and present credit activities, the status of their credit account and also information about loan such as payment history ( if taken any). Now the question arises: Why need a Credit Report? Potential lenders or creditors refer to a person’s Credit Report in order to sanction loans or provide them credit. Basically, the report tells them about the person’s creditworthiness.
Why do you need a Credit Card?
A Credit card is a very clever monetary Instrument that not only removes the stress from financial tightening but also provides protection. Yes, you read it right PROTECTION, for instance whenever you buy something or give your credit card to someone, you for a fact know that you aren’t giving them Authorisation to extract or reach details of your bank account as in the case of a debit card. And that is why, whenever there’s a problem with the transaction, The Credit card company or the bank acts as our knight in shining armour and fights for us instead. So what is stopping you from starting your Credit Journey?
Why is it Important to build CIBIL scores at an early age?
Before discussing the importance of a CIBIL score, it is important we are clear on what it exactly means. A CIBIL score is basically a numeric summary of our Credit Report, which is in three-digit format, lying in the range: 300–900. Be it in our 20s,30s or 60s, one thing that always is and will be important is our FINANCES. A good CIBIL score makes one qualify for future loans, may it be a car loan, a home loan or financing your own business, as any bank or creditor accesses your CIBIL score before granting you the loan. A good credit score also reduces the amount of interest applied on our loans, helps us save on services like interest on insurance premiums and the list of its merits goes on and on. And we at PayCrunch are here to guide you and help you to kickstart your journey to build a great Credit Score for yourself. PayCrunch is a UPI based Credit Card application for College students, with an aim to increase a more financially literate generation that knows the ins and outs of their finances.
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By Shreya Kundu
