From No Credit To Credit In 3 Simple Steps

Has your loan application been rejected because you don’t have any credit history? So how do you build your credit history? Well, yes, it’s a cycle of credit and credit again!

As per two recent notifications by the Reserve Bank of India, all banks and other lenders need to take into account credit information reports or CIRs from one or more agencies in all lending decisions and account opening. However, a loan application should not be rejected just because the applicant has no credit history. So let us get going and look at the 3 ways that will help you build your credit history.

1. Apply for a secured credit card
A secured credit card is backed by a savings account or by a deposit used as collateral on the credit available for the card. As you keep paying your outstanding dues on time, your good credit behaviour will be reported to the credit bureaus. And this good credit behaviour will help build your credit history.

2. Become an authorised user
Become an authorised user of a family member’s or spouse’s credit card – it should be one of his/her oldest credit card accounts. But do make sure this ‘someone’ repays outstanding dues on time. After you become an authorised user, you will have access to some form of credit. Once you have that, make sure you make 100% payment of all your dues on time and don’t spend beyond what you can repay.

3. Check your credit score
Do check your credit report for your latest score. For an individual with no credit history or who does not have enough credit history, the score generated is NA or NH (CIBIL score). Typically, conservative lenders could view NH negatively as per their credit policies of not lending to an individual who has no track record. But an aggressive lender with a higher risk appetite may approve your credit application. Hence, look for lenders where you may have a better chance.

We hope you will be able to build a good credit history with time. Just make sure that you do not apply randomly for credit facilities as this indicates a credit-hungry behaviour. Also, too many enquiries are viewed negatively by lending institutions.

About the author: Satish Mehta is the Founder and Director of Credexpert, a credit and debt counselling company in India.