At the very beginning of the adult life, it is evident for one and all to have absolutely no credit history. This is also the case with individuals who prefer using cash over Credit Cards for their general day-to-day expenses as well as substantial purchases. What most people don’t know is the fact that while there is nothing wrong with having no credit history at all, it may be somewhat troublesome when they actually need a credit. This is because most lenders shy away from giving out loans to someone whose repayment behaviour is difficult to track.
Having a good credit history not only helps you gain access to low-cost loans but also ensures that you enjoy affordable premiums when you opt for various types of insurance. Moreover, it helps you in day-to-day endeavours such as getting an apartment on rent, acquiring a job with a reputable organisation, and even getting a cell-phone, cable or gas connection. The bottom line is, in order to come off as a responsible person with good financial discipline, it is best to have a credit history to show for it.
If you don’t have a credit history yet, you ought to start working towards building it. Since most credit buries generate monthly reports, you can rest assured of being able to start building the history in as little as 30 days. Don’t know where to start? Well, that is precisely what we are to tell you. However, before we spill the beans, we would like to suggest that you first order a copy of your credit report. Even if you think that you haven’t taken any credit, and there is not a chance in the world that you have a score, let alone it being bad, we strongly urge you to check it anyway. Once you have your score on your hands, it would be much easier to work towards building it, or improving it, whatever may be the case.
Now that you know your position let us guide you on how to build credit!
One of the easiest ways to ensure that your credit history looks good is to pay your bills on time. More often than not, your bill payment behaviour accounts for 35% of your credit score. Regardless of how trivial or substantial the bill is, whether it is just a phone bill of some hundred rupees or the electricity bill for your new plant, which ranges into a few thousand rupees, pay everything on time. If you are unsure that you will be able to do so month after month, simply deploy an autopay service that does the task for you. This simple yet effective measure will work wonders in helping you create a positive credit history.
Just a few years ago, rent payments had no impact, whatsoever, on your credit behaviour owing to the fact that a simple contact bound it. Thankfully, in the present day scenario, you can use your rent payments to build your credit history. If you register with a relevant service such as Rent Track, the credit bureaus will take a note of your rent payments, which will eventually help you work your way towards a better credit score.
This is one of the most efficient measures of building a credit score. Once you get your hands one of the Best Credit Cards in India that resonates well with your spending behaviour, it is advisable that you use the card to make certain payments every month. That being done, you must pay your Credit Card bills in full, every single time. This will help the credit bureaus understand that you maintain a reasonable financial discipline, thus leading to a substantial increase in your credit score, within a span of 4 to 6 months.
In your case, however, getting a Credit Card might prove to be a little tricky. Since you do not have a credit score to show for your creditworthiness, the bank might only offer you a secured Credit Card. This type of card is similar to generic Credit Cards in all respects, except for the fact that it would require you to pay an upfront deposit, in cash. The deposit will act as collateral, thus protecting the bank, in case you defaulted. To combat this initial fee, we recommend you get a card with a low credit limit. Once you get the card, all you need to do is use it judiciously and make your payments on time. As far as the cash deposit is concerned, you can get it back, when you choose to close the card. While this deal may come off an expensive, to begin with, it will nonetheless help you in building credit in a sound manner, thus proving to be worthwhile.
As is the case with a secured Credit Card, a guaranteed loan is a fool-proof way of building your credit. To get this loan, you need to approach a bank or an online aggregator and place your request for a credit-building loan. Here, the bank will approve your loan application, but wouldn’t actually hand over the disbursed amount to you. You will first have to repay the loan complete with the interest in the form of equated monthly instalments (EMIs). Once you have repaid the entire loan amount, the bank will release the amount.
A secured loan might come off as uncanny, but considering the benefits it offers, it might be worth a shot. Of course, you must only opt for this alternative if you are entirely sure of your ability to repay the loan in full and on time, lest you will risk losing the money. Moreover, your credit score may receive an unsolicited blow.
Now that you are aware of some of the most promising ways to start building your credit, we recommend you get on the train as soon as possible. After all, it could never be too early to do so. If you are old enough to have a bank account on your name, you are old enough to build your credit. Trust us, all you need is some patience, and you will see an incredible hike in your score within just the first few months!
Also Read: 5 Best Lifetime Free Credit Cards in India
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.