The third edition of Paisabazaar’s credit insights report ‘Making India Credit Fit’ has analysed some of the trends leading to the fast-paced growth of credit, identifying gaps and disparity among the salaried and self-employed, various age groups, and more. Overall, 3.7 crore consumers were taken into consideration for the study. One of the key insights is how young Indians are becoming increasingly comfortable with accessing credit from an early age due to ease of access and comfort in handling credit for varied needs.
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There has been a significant increase in awareness of credit health among young consumers. According to the study by Paisabazaar, in FY19, 14 percent of individuals who checked their credit scores on Paisabazaar platform were under the age of 30, and 52 percent were in the 30-40 age group. Now in FY23, the landscape has shifted considerably, with a significantly higher ratio of younger consumers coming to the Paisabazaar platform to access their free credit score over time.
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Interest among women for home loans is increasing, as per the Paisabazaar survey.
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With rising awareness and ease of access, a large number of consumers are using credit for varied needs and from an early age. According to the study, 64 percent of consumers acquired their first credit product before they turned 30. Among these, a notable 37 percent were under 25.
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The lack of access to credit remains a significant hurdle for the self-employed. For instance, the approval rate for housing loans is lower for self-employed people at 19 percent compared to 28 percent for salaried. In the absence of formal employment and regular and structured income, many self-employed take time to build credit history. Hence, access to credit takes time.
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Youngsters show a proclivity towards 2-wheeler loans and credit cards. But as people grow in age and their careers, their ambitions grow. That’s when they take bigger loans like consumer durables and home loans.
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Earlier, credit was seen as the last resort to be utilised only in times of dire necessity like medical emergencies, house purchases, etc. Many also viewed credit consumption as a sign of financial instability. But over the years, there has been a clear shift in the consumer mindset and resultant behaviour. Now, there is growing comfort in accessing credit for aspirations and lifestyle choices. Younger generations, in particular, have shown a greater willingness to utilise credit for travel and other lifestyle purposes.
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A key insight in Paisabazaar’s study reveals that salaried consumers are credit healthier than the self-employed segment. While over 25 percent of salaried consumers have an excellent credit score of 770 and above, among self-employed consumers it was only 14 percent with a strong credit profile.
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Credit health gets better with age, according to the study. That is because older consumers are more adept at handling credit.
Hiral Thanawala is a personal finance journalist with 9 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
