Threatening Family Welfare, 3 Economic Socio-Economic Impacts Resulted From Credit Scores

Illustration of family saving (Photo: Freepik/inkdrop)

JAKARTA - Credit scores are one of the important indicators in determining a person's feasibility to obtain financial facilities, such as loans, credit cards, or even property rentals. This score reflects a person's financial history and habits, as well as their ability to fulfill their timely payment obligations.

The Financial Information Service System (SLIK) of OJK is an innovation in Indonesia's financial world which is designed to increase transparency and efficiency in the credit assessment process.

SLIK, managed by the Financial Services Authority (OJK), functions to collect and store financial information from debtors. This data is then used by financial institutions to assess the credit eligibility of prospective debtors.

According to Ully Safitri, the Certified Financial Planner and Consultant OneShildt, the existence of SLIK provides great benefits for financial institutions and the community. This was revealed by Ully in a Jenius Financial Class event entitled 'Financial Resolutions: Build a Better Financial Reputation'.

"SLIK OJK works by collecting and storing debtor financial information. This information is then used to assess the credit eligibility of prospective debtors," he said when met at Silk Bistro, Menteng, Jakarta, on Friday, January 25.

Ully explained that credit scores were influenced by several main factors. Starting from payment history to new credit card applications.

"The payment history, credit utilization, old credit history, types of credit used, and new credit applications are the main factors that affect credit scores," he explained.

Ully also explained the benefits of having a good credit score.

"Good credit scores provide easier access to lending, lower interest rates, and a faster credit approval process," he explained.

However, there are financial risks that need to be considered if credit scores are bad. Some of them are loan rejection, higher administrative costs, and more expensive interest rates.

Ully explained that financial reputation reflects the financial institution's trust in a person's ability to manage debt and financial obligations. A good reputation opens access to loans with more profitable offers.

To build this reputation, it is important to always pay bills on time, use credit wisely, and borrow as needed. Each individual must also be careful in choosing personal loans, ensuring that the platform they choose is licensed and registered with the OJK.

"Everyone has different financial goals, ranging from education, house renovations, plans to start a business, even preparation for an emergency. One of the tools that can help accelerate the achievement of this goal is personal loans, with an important note to borrow according to capacity and pay on time to build a good financial reputation," said Ully.

Credit scores not only have an impact on individuals, but also on family and community at large. Ully explained the three socio-economic impacts resulting from credit scores, including:

1. Individuals

Good credit scores increase accessibility to financial facilities, such as loans and credit cards. In addition, this also affects a person's mental and emotional welfare due to the lack of financial pressure.

2. Family

With a good credit score, a person can avoid his family from the burden of the sandwich generation, where children must support the financial needs of their parents. In addition, a good credit score allows families to provide better education for children, thereby increasing their social mobility.

3. Community

On a wider scale, good credit scores among the public can improve economic stability and empower MSMEs. This is because MSMEs often depend on loans to support their operations.