How Can You Build A Credit History If You Do Not Have Any Existing Loans?

Today, credit score has become an important part of the banking sphere. Bank lenders swear by it, with consumers always seeking to stay updated. There is no doubt about its significance and importance in today’s market. However, despite this, there are many individuals who have never availed of a credit card or loan and, as a result, have an inadequate credit history, which obviously means zero credit score.

In such cases, what should you do to form a credit history and have a good credit score? Before we discuss ways to form a credit history, know what CIBIL score is.

What is the CIBIL score?

CIBIL (credit information bureau limited) is one of the most important bureaus out of the 4 bureaus licensed by the RBI. There are 3 other companies also licensed by RBI to work as credit information bureaus. They are Equifax, Experian, and CRIF Highmark. However, the CIBIL score is the most popular score in India and is highly trusted by lenders.

CIBIL Limited maintains credit files on about 600 million individuals and 32 million companies. CIBIL India belongs to TransUnion, which is an American multinational group. Thus, the credit score in India is called the CIBIL Transunion score. CIBIL score is a three-digit numeric representation of your rating, credit history and report, which ranges between 300 and 900. The closer you are to 900, the better your rating is.

Remember that the CIBIL score plays a vital role in your credit application process. When you approach a lender for a loan, the lender initially checks your CIBIL score and reports it. If your CIBIL score is on the lower side, the bank might not consider your application further. In case your CIBIL score is on the higher side, the lender will consider your application and your other details to decide if you are credible for a loan.

CIBIL score is majorly the first impression that lenders have about you. The higher your credit score, the higher your chances of availing of loan approval. The decision to lend completely depends upon the bank, and CIBIL Bureau does not in any way determine if the credit card or loan should be sanctioned.

Usually, a credit score of 750 is good. What should you do if you want to build a credit score or establish a credit history? Here are crucial tips on how you can form a good credit history for yourself.

∙       Get a credit card from your existing bank

Assuming that you are salaried, you can think of opting for a credit card with the bank maintaining your salary account. As the bank already has your regular income proof, your application process will be smooth. Once you avail your credit card, you just require maintaining it in a disciplined manner. It means paying your bills by the due date and remaining within the 30 percent CUR (credit utilization ratio). If you meet the expectation and keep this up for 6 months, you will for a sure kick start your credit history with the desirable credit score. However, do not stop there. Ensure to keep up with your regular repayments each month to make sure your credit score does not dwindle.

∙       Avail secured credit card

The next way to form a credit score is to avail of a secured credit card. Here is how it works; you must deposit a specific amount with the bank as a fixed deposit. And the bank will issue the credit card against your fixed deposit, of which you can use up to 90 % of the parked amount.

∙       Buy goods on an instalment basis

Are you looking for a phone upgrade? Why not ignite your score with such a purchase? Electronics online or offline stores both generally provide you with consumer durable loans if you wish to purchase a phone or any other durable on an instalment basis as opposed to the usual down payment route.

Now let us assume you are looking to pay for a laptop in twelve monthly instalments. In 6 months, your score may begin to take shape.

Maintain your credit score

Ensure that simply kick-starting with building your credit history does not assure a good history. For you to form a good long term credit history, you must ensure to form a good credit behaviour. You must maintain it in a manner that does not affect your progress.

Listed here are certain don’ts you must keep in mind for maintaining a good credit score.

∙       Do not delay your credit card payments: This will negatively impact your credit score.

∙       Do not avoid bill alerts: It is one of the things you must avoid doing at all costs. Do not miss out on your repayments. Defaulted repayments can impact your credit score to a huge extent. So, ensure your bill repayments are made on time.

∙       Do not max out your credit card limit: Experts advise that you must remain under the 30 percent of the permitted credit card limit, so in case your card endows you with a limit equaling Rs 40,000, ensure your expenses are under Rs 12,000. If you want a strong credit score.

How can you track your credit score?

Alright, as now you know how you must form a credit history and hold a checklist of various mistakes to avoid, all you must do is regularly keep track of your credit score. How can you do this?

Well, for this, you can visit any lending marketplace available on the online channel to review your credit report. You can fetch monthly reports through this channel. On the other hand, you can also visit credit bureau sites to fetch one free credit report per bureau. Note that, post availing your free credit report, if you want to fetch more reports from any bureau, you will have to pay a charge for each fetch. In case you view any discrepancy or error in your credit report, ensure to approach your lender or dial the CIBIL customer care number for a quick fix.