Aspirations vs Reality: Young Indians' Encounter The Cost Of Creditworthiness

A recent CRED survey has discovered the truth about India's salaried young professionals—who despite doing everything right with their money—are weighed down by a perplexing credit system. The CRED-YouGov Credit Survey findings, based on the opinions of over 5,000 people in cities such as Delhi-NCR, Mumbai, Bangalore, and Chennai, point to the tug-of-war between what these people want and what they are confronted with in the way of financial management.

The Dream of Financial Freedom

India's young professionals have big financial aspirations. 98 per cent of the survey's respondents cited being perceived as financially independent as a top priority, and 95 per cent appreciated the value of a good credit score. They know that maintaining a healthy credit history is critical to financial well-being in the long run.

With greater credit access, 54 per cent of them would invest more, 38 per cent would begin businesses, 30 per cent would seek additional education, and 47 per cent would bring forward their financial objectives. These are hopes that arise from a genuine wish to expand, not only for themselves but also to be able to contribute to overall societal development.

But these aspirations are usually hindered by the same systems that are supposed to assist them. The complications of credit and debt management have been a significant hurdle for these people.

Managing Multiple Financial Products

India's responsible borrowers are busy users of the financial system, but managing more than one financial product is exhausting. The survey finds that 97 per cent of respondents have more than one financial commitment, namely EMIs, loans, and credit cards. About 53 per cent have recurring EMIs, and 47 per cent have active loans, whereas 63 per cent have investments in mutual funds.

In spite of their active usage, they encounter many obstacles. Nearly 39 per cent have trouble keeping tabs on multiple payment dates, 37 per cent are confused by multiple billing cycles, and 36 per cent struggle to keep tabs on spending on different credit cards. Furthermore, 37 per cent are overwhelmed by multiple interest rates, 33 per cent struggle to make sense of reward structures, and 38 per cent are forever attempting to keep tabs on promotions. An additional 30 per cent can't even balance their books.

These issues don't simply cause stress—there are real-world repercussions.

The Real Price of Complexity

The complications of credit management are costly. About 79 per cent of the respondents have experienced adverse consequences from a poor credit score, including 47 per cent paying higher interest on loans. On One hand, where 38 per cent have been rejected for loans, at least 26 per cent have been rejected for rental applications and job opportunities as a result of their credit history.

Akshay Aedula, product and growth at CRED, says, "79 per cent of Indian credit-card holders find debt stressful. This isn't because credit is inherently anxiety-inducing — it's because our system is built to prevent bad actors at the cost of enabling responsible behaviour."

This illustrates that while these individuals are doing a responsible job of taking care of their finances, the system punishes them for external issues outside their control, such as confusing payment cycles or timing errors with payments. The result is an ongoing struggle for access to opportunities for which they would qualify based on financial responsibility.

The Hidden Stress of Managing Finances

The emotional burden of living with financial stress is great. The poll finds that 79 per cent of those surveyed suffer from debt-related stress, with 45 per cent juggling more than one commitment and 39 per cent struggling to keep track of expenses. In spite of trying to keep up, 52 per cent of them still end up missing payments because of factors such as hectic schedules (48 per cent), forgetting due dates (44 per cent), or misinterpreting payment terms (43 per cent). Another 50 per cent have timing problems with the availability of funds, which only causes more stress.

Surprisingly, 25 per cent of the respondents keep elaborate spreadsheets to keep track of their finances, 19 per cent use paper records, and 6 per cent attempt to do it all in their heads. Still, they experience the same problems. It's obvious that no matter how hard they try to be responsible, the system is just too complicated and demanding.

The Knowledge-Action Gap

The survey also reveals a concerning knowledge-action gap, 40 per cent of consumers don't even know their credit score, and a mere 41 per cent of them check their credit report regularly. Moreover, 30 per cent of them feel that they don't have the proper knowledge to handle their credit well.

This lack of financial responsibility and the system's sheer overwhelming complexity makes it difficult for people to be able to make effective changes in their credit status.

It's Time to Recognise Responsibility

The CRED-YouGov survey findings indicate that India's most financially responsible citizens are being held back by systems that have been created with mistrust in mind. This not only hurts individuals but also undermines the nation's potential for economic growth.

The answer is obvious, it's time for financial systems that reward and appreciate responsible behaviour. Rather than having to treat all individuals as potential defaulters, we require a system that allows individuals to achieve their financial goals without having to constantly struggle against unnecessary complexity.

Aedula also adds, "While high usage of your credit card might seem like effective credit management, it signals risk to bureaus. Keep your credit utilisation low, by spreading spends across credit cards for example, to demonstrate responsible behaviour...multiple credit card EMIs, a home and auto loan, credit that you took to finance a vacation or a large purchase are overwhelming to manage in old-school ways like mental math or spreadsheets. Use tools that give you a unified view of current and future obligations, so you don’t miss a payment."

As the survey finds, "No nation prospers without enabling its productive citizens with opportunities. When we tax trust, we tax progress." It is high time that we convert credit nervousness to confidence, helping the young Indians bring their dreams nearer and give wings to a resilient economy.