Do Not Panic if You Don’t Have a Credit History

Are you seeking small personal loans or home construction loans? Do you know what are the requirements to get a loan approved? No matter what kind of loan you want you must have a good credit score to have it sanctioned by a bank or another financial institution. You can get your CIBIL report (the most popular credit report recognized by the banks in India) online and check your credit score yourself. However, what do you do when you don’t have a credit history, and hence a credit score?

A lot of people get panicked when they realize their credit history is blank and worry they won’t be able to get a loan ever. However, this is not true. One can apply for a personal loan without CIBIL score also. Not having a credit history doesn’t mean you can’t quality for a loan or credit card. You do however need to provide valid reasons for the same. But first things first.

Why do Some People Don’t have Credit History?

Most credit report bureaus, such as CIBIL or Equifax India, consider your credit activities from the past 2 years to calculate credit score. However, if you didn’t use a credit card or took a higher education loan, land mortgage loan, etc. during this period then there will be no history to cover in the report. In fact, many college-goers and bachelors don’t have credit history as they don’t need loans or credit cards.

If you do have taken some form of credit within past 24 months but still your lender has informed the absence of history then there could be another reason for that. Different banks and financial institutions have their own preferred credit bureaus. For example, maybe SBI home loans are sanctioned on the basis of CIBIL report, and HDFC home loans on the basis of the credit report released by Experian.  The lenders don’t necessarily have to report your credit activities to all the major credit bureaus of India. Thus, if your previous lender had reported your loan details to CIBIL, and the lender you are applying for a used car loan now is associated with Equifax, then when they will send request to them they will find no credit history of you. To avoid such kind of misunderstanding you can contact your bank and check the report yourself. You can also request them to review the report (from a certain credit bureau)f that carries your activities rather than the one they usually prefer.

What to do When you don’t Have a Credit History?

As mentioned earlier, you don’t need to panic if you don’t have a credit history. It’s true that getting a loan or credit card is difficult without a credit history, but it’s not impossible. There are many lenders who can overlook your absence of credit report and credit score. However, you may not get good interest rates.

If you are having trouble getting a loan due to absence of credit history then you may have to build a credit score after all.

One of the easiest ways to start a credit history is by taking a credit card. It is easier to get one if you have a steady income or a decent business. Another benefit of getting a credit card is that you don’t have to provide collateral.

Once you have obtained your credit card make sure you pay attention to the following tips to improve credit score in a small amount of time:

  • Pay your bills on time, every time. This is the most influential factor in the credit score development process. So, make sure you are consistent with the payments. Even one late payment can harm your score.
  • Use the credit card responsibly. Excessive credit usage is detrimental to your credit score. Thus, use your card with caution. Your monthly utilization ratio should not exceed 30%. So, if your credit limit is Rs. 1 lakh, then you should spend less than Rs. 30,000 a month.
  • Check your report from time to time. To ensure you don’t deviate from your path do check your credit report from time to time. If you notice a drop in the credit score then you can check what has caused it, and then fix it.

Having a good credit score is extremely important today. If you don’t have it at all, then you should start building it ASAP.