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How to Build Your Credit Score from Scratch

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How to Build Your Credit Score from Scratch

Have you ever availed of any form of credit? Is your CIBIL score zero? Do you want to turn that zero to 750+? If you answer yes to these questions, you are reading the right article. It takes time and works to build a CIBIL score, but it is a vital aspect of your financial path. No one will grant you a loan or a credit card since you have no credit history, and to earn a CIBIL score, you must pay your loan and credit card obligations on time. Below are the ways you can build your credit score from scratch.

A Secured Credit Card

A secured credit card is issued in exchange for an FD(Fixed Deposit). It has all of the characteristics and benefits of a credit card and assists you in building credit. These credit cards are easily obtained. But, make certain that your bills are paid on time.

In this case, your information is frequently reported to credit agencies. Therefore secured credit cards eventually help you build credit faster. Several credit card companies provide monthly information regarding your balance and payment. Your credit history reflects everything, including the one or two transactions you make and pay off each month.

There are also ‘Student Credit Cards,’ developed exclusively for students and young professionals.

A Savings Account and a Deposit

Banks often issue pre-approved loans and credit cards based on the money in your payment account. These deals are made available for Savings Accounts based on the amount in your account. You may apply for any of these offers using your online banking account.

Banks typically issue secured credit cards or loans based on the deposit amount. Your deposit serves as security, allowing the bank to trust you and provide you with a loan or credit card.

Most banks provide a credit limit for your card based on the amount of money you deposited. It is important to note that until you default on the loan, credit bureaus will not be recorded.

Of course, you may use these Credit Cards just like any other Credit Card to make purchases or payments. If you fall behind on your payments for an extended period, the bank may take the funds from your deposit to pay down your credit card amount.

An Add-on Card

You can obtain an add-on card by piggybacking on the credit card of a family member or acquaintance. You can easily obtain it as it doesn’t depend on your qualifying conditions. This can be for regular expenses to help develop your CIBIL score use. Remember to use the card wisely, not exceed a certain limit, and pay your bill on time. Misusing the card or failing to make payments will harm both of your credit ratings.

Check whether your family member or acquaintance has decent credit and uses their credit card responsibly. You shouldn’t be involved as an authorised holder of a low-balance account or an account with late payment history. 

A Guarantor

If you seek a guarantor, remember that they will be equally responsible for any debts you take out. It is easy to obtain a loan if you have a guarantee because most banks will make loans to those with no credit history but have a guarantor. Make sure your guarantor has a strong CIBIL score and can repay the loan if you can’t.

A long-term micro loan

When applying for a loan, choose the loan with the longest possible term. The first advantage is that your Equated Monthly Instalment (EMI) will be cheap. This will allow you to make payments without difficulty. The second benefit is that your credit score will increase with each on-time EMI payment you make. The third point to remember is that the longer the term of your loan, the longer your credit history will be. The longer your loan account is open, the higher your credit score will be.

Next Step

Your CIBIL Score Login is done, but it’s time to maintain a good CIBIL Score. So, Make on-time payments on your invoices and EMIs. Even a single day’s delay might harm your credit score. If you have a credit card, you should always try to pay your payments in full rather than just the minimum sum due. If you are a co-applicant for a loan, you must make sure that the one who has taken the loan with you is making regular payments. Take out many loans at the same time. Not only will it be financially burdensome, but it will also negatively influence your credit score since you will be viewed as ‘credit hungry.’

End Note

Increasing your credit score does not have to be difficult. To get started, follow a few basic steps and stick to a strict debt payback plan. Go through the above-mentioned points to be sure on how to build a good CIBIL score.