If you’re planning to buy a phone, a TV, or a car, you will be mostly buying it “on EMI”. Credit has become an integral part of our purchasing decisions, and some also see it as a simple convenience. And in many ways, it is!
Credit makes aspirational goods more affordable by letting us spread payments over time instead of parting with a large sum at once. It also removes the hassle of transferring money between accounts or worrying about transaction limits. With just a few clicks or a quick digital signature, the purchase is complete. But this very convenience can be a double-edged sword. Without fully understanding how loans work or how borrowing affects long-term financial health, the same tool that helps you today could hold you back tomorrow. This is why credit education is no longer optional.
Why credit scores matter
Even today, few people truly understand what a credit score is or how it changes when you take a loan. When buying a product, we often focus on its features like screen size, battery life or mileage, and horsepower, yet, when it comes to credit, many skip reading the terms and conditions. That is like buying expensive furniture without checking whether it fits your home. Before signing up for a loan, you should know your monthly EMI, the payment due date, the payment method, what happens if you miss a payment (charges and interest), and how to make a delayed payment if needed.
The “features” of your loan are as important as the features of what you’re buying. A single missed repayment can hurt your credit history and lower your score; and unlike a dent in a car, repairing a credit score takes time, discipline, and considerable effort.
Your credit report and score are shaped by the types of credit you use (credit cards, personal loans, home loans), your credit utilization, your repayment track record, and any delays, defaults, or settlements. Lenders look not only at whether you can repay today, but basis your history, gauge whether you will do so reliably in the future. Every swipe and every paid or unpaid EMI shapes your borrowing power for years ahead.
Why credit education belongs in classrooms
As young adults are taught skills such as communication, teamwork, and technical expertise to help them perform more effectively at their workplace, similarly, they should also be taught financial skills. This includes making prudent financial decisions, managing aspirational purchases wisely, maintaining a healthy credit history, and checking credit reports regularly. The earlier these habits are formed, the easier it is to maintain a good score and borrow when it’s truly needed.
Integrating credit education into school and college curriculum can give young people the tools to manage credit responsibly from the start. Early awareness means fewer costly mistakes, better decision-making, and stronger financial resilience. Credit bureaus and other stakeholders, through educational outreach, can enable shaping this foundation so the next generation is equipped with the knowledge to plan their finances optimally and with confidence.
Long-term benefits of early financial awareness
Financial awareness isn’t just about knowing interest rates or the difference between debit and credit; it’s about recognizing the long-term effects of short-term decisions. Every missed EMI, high utilization of credit card, and every late payment leaves a mark. A healthy score can unlock better interest rates, faster approvals, and higher credit limits; a poor score can make borrowing difficult, expensive, and the process stressful.
Borrowing isn’t just about meeting today’s needs; it’s also about planning for your future. Financial discipline is a lifelong habit; your current behavior will determine your future opportunities. Therefore, it’s worth learning early and implementing healthy financial practices. This will ensure that when the opportunity knocks, you can make the most of it.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, legal, or professional advice. While every effort has been made to ensure accuracy, readers should verify details independently and consult relevant professionals before making financial decisions. The views expressed are based on current industry trends and regulatory frameworks, which may change over time. Neither the author nor the publisher is responsible for any decisions based on this content.
Ramkumar Gunasekaran, Wholetime Director, CRIF High Mark