Here's How Creditworthiness Accelerates Your Financial Independence

Blog Post11/01/2022
Credit Advice

Lets talk about how credit (via loans and credit cards) can be a more efficient means to financial freedom.

For many of us, financial freedom means having the savings, investments, and cash on hand to afford the lifestyle we want. Let’s examine the ‘cash on hand’ portion of that statement and talk about how credit (via loans and credit cards) can be a more efficient means to financial freedom.

Back to the basics: Credit is the ability to borrow money (loans) or access goods and services for which you'll pay later (using cards). Lenders and merchants (known collectively as creditors) allow you to do so based on their confidence that you can be trusted to pay back what you borrowed, along with any charges that may apply. The extent to which creditors consider you worthy of their trust, is your creditworthiness, and the main reflection of it is a healthy CIBIL score - a 3-digit, personalised number denoting your creditworthiness and financial status.

Why credit is better: Credit is a more efficient way to purchase goods and services that you can afford, note that underline. So long as you have the funds to pay your bill/EMI in full, then credit is a logical and desirable alternative to cash for purchases and a necessary tool for online transactions and in-person swipes (e.g., at shops, restaurants, petrol pumps, etc.)

There’s also the fact that cards and loans come bundled with offers rewards programs, these could be cashbacks on your purchase, insurance coverage, pay points that you can redeem later, or airline miles and hotel rewards. Focus on using credit as a tool to get added value from your planned spending, and you’ll rely less and less on cash.

From a security standpoint as well, credit comes with various levels of authentication to ensure that it’s you, and not someone else, who is spending. And of course, the ultimate safety net in the case of a credit card – should you lose your card, cancelling it is only a phone call away (again, after verifying your identity) Whereas lost or stolen cash is gone forever (unless some kind person returns it to you)

When credit is better: For meeting recurring expenses such as rent, fuel, and school fees. These are fixed and regularly recurring (monthly/quarterly) expenditures. By moving them to a credit card, you can free up liquidity for other purchases, as well as claim rewards and points that can help optimize spending. The next occasion when credit is a boon is in times of emergency, e.g., to meet unforeseen medical expenses. With disciplined and responsible usage (which is entirely dependent on you) comes a better CIBIL score. Which in turn helps in qualifying you for better loans and interest rates and supporting your larger life goals, such as starting a business or buying a vehicle or house. For international spends, the last thing you want is to not have enough cash when on a holiday or trip abroad. Most credit cards allow for international spending, although while they may not charge higher fees for international transactions, they could use currency conversion rates that favour the card issuer. It's a small trade-off though, for the easy and vast global access that the user gains.

How to better your credit: Today when so many things depend on your creditworthiness, having a good grasp on your credit information can help you get ahead in life and secure your financial independence. A healthy CIBIL score means a good standing in the market, and better chances of securing credit when needed. So, being informed about your score and monitoring your credit report all year round is ideal. CIBIL’s Credit Monitoring feature alerts you about updates to your score and report, offers you unlimited access to our Score Analysis feature, and more. Credit Monitoring is both a personal assistant and a watchdog that alerts you whenever there are changes to your profile. These include, new accounts being opened in your name, a credit card balance increase, or a late payment reported by one of your creditors. The feature keeps you well informed and aware about the health of your credit profile and consequently helps you keep track of your financial independence.

And there you have it; financial freedom is about living life on your own terms and without frequent money worries. If you haven’t already done it, consider credit as a great means of furthering your spending power – with the right safeguards and monitoring of course.

Stay credit-ready by monitoring your CIBIL Score & Report.

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Disclaimer: The information posted on this blog (Information) is prepared by TransUnion CIBIL Limited (TU CIBIL). This Information is for generic informational purposes only and is meant for consumer education and awareness about credit scores, credit history and credit reporting. The Information posted on the blog does not constitute credit advice and the user will need to consider the same and take independent informed decisions . No part of this Information may be quoted out of context, distorted ,distributed, published and/ or reproduced in any form and manner whatsoever. Consumers are advised that the Credit Information Reports (CIRs) prepared by TU CIBIL are based on collation of information, substantially, provided by credit institutions who are members with TU CIBIL. TU CIBIL is not responsible and /or liable for errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions. TU CIBIL does not guarantee the adequacy or completeness of the Information and/or its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Information. TU CIBIL expressly disclaims all such liability. Further, this Information is based on the data available with TU CIBIL at the time of publication and therefore may not be up-to-date.