Your credit score can make a critical difference to your financial health. It impacts your ability to get finance on the best terms, be it a car or home loan, or even a personal loan to fund the vacation of your dreams.
What is a CIBIL score?
A credit score is a three-digit numerical representation of your credit report that is an indication of your creditworthiness. When a lender evaluates your application for credit, they rely on this information to take a decision. A higher score typically results in better terms of credit.
Unfortunately, having a low CIBIL score is not out of the ordinary but the fact remains that with some effort, you can turn your credit score around and ensure that your financial future isn’t impacted. At the other end of this spectrum are people who do not have any credit history, which also puts them in a similarly difficult position to get a loan or card at competitive interest rates.
Building credit history
If you’re new to using credit or currently have a low score owing to a shaky credit history, don’t worry, it’s not time to hit the panic button yet. With some diligence and monitoring you too can achieve and maintain a good credit score to secure your financial future.
Let us take a quick look at the factors which affect credit history:
Now that you know which factors impact the credit score, here are some hacks to help you build a solid credit history:
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Check your credit report – The first step to get you started is to call for a copy of your credit report from a credit bureau. There are currently four credit bureaus in India. Do go through your report carefully to ensure that all the data mentioned therein is accurate. Check that the account information pertains to you, and if you notice any errors, bring them to the attention of the concerned bureau immediately. This will ensure that your credit history is not only accurate but will also protect you against identity theft. If you have no credit history, there may not be much information in your report, but whatever there is, needs to be checked for accuracy.
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Apply for a credit card – When you don’t have any credit history to build on, the best way to begin is to get yourself a credit card. However, be warned that falling into a debt trap is easy when you have credit at hand! Make sure, therefore, that you don’t delay payments. Instead, make them in a timely manner and ideally in full, so that this card starts to reflect positively on your credit report. Use this to your advantage to build the first blocks of a solid credit history.
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Apply for a secured credit card – It’s possible that a credit card issuer may be unwilling to issue a card to a first-time user without any prior credit history. In such an instance, it is possible to approach your bank for a secure credit card, which is typically issued against collateral such as a fixed deposit. The limit on such cards will be capped at a certain percentage of the deposit if you have no or a low CIBIL score. This is a good way to build a robust credit score over time.
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Apply for an add-on credit card – If the above two solutions are not feasible, you could consider requesting a family member (parent, sibling or spouse) to apply for an add-on credit card. With this card in your name, you will start to build a score. Do keep in mind that your financial habits will reflect on the credit report of the primary card holder, and vice versa. So, do use this tool judiciously in order to build a robust score.
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Apply for a consumer loan – Another way to obtain a credit solution without any previous history is to opt for a small ticket consumer loan, to purchase any white goods such as a microwave oven or even a mobile phone. Make sure you repay EMIs in a timely manner because this will then be one of the best and quickest ways to establish a good score.
Tips for good credit behaviour
Sometimes, it takes credit to build credit history. Become financially responsible and display good credit behaviour in order to be able to get finance when you really need it the most. When your financial habits are responsible, your credit history gets a solid foundation and you can get further credit including a personal loan with relative ease.
Once you have established a credit history, make sure that all your payments are made in a timely manner and in full. This is not just a good habit to form, but it also helps with maintaining a robust credit score in the long run.
With the above tips and tricks, get started on your healthy credit journey today!
Credit Sudhaar 