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Looking To Build Your Credit History from Scratch? Here’s You Can.

Are you looking for buying a new 4-wheeler, a new home, or secure a loan? Your credit report and credit score play an important role in determining your credibility. This makes it crucial for you to check credit score periodically. However, what if you have never used a credit before or have no idea where to check free credit score? Do not fret, forming a credit past record is simpler than you think and can come across as a benefit for you over the long term. Read on to know some easy steps you can consider taking to begin forming your credit history. 

How to form credit with a zero-credit history?

Apply for the credit card 

To start forming a credit record, consider placing an application for a preferred credit card, which is an easy and convenient mode of forming your credit score. Note that, there are two kinds of credit cards in India – unsecured and secured. 

Secured credit card – 

Secured credit cards usually are issued by banks and credit card companies in exchange for security or collateral, primarily a cash deposit. Such credit cards are ideal for borrowers with no or little credit records. By using a secured card in a responsible manner and making repayments on time, you can know your credibility and ameliorate your score. You can simply obtain a secured card by offering a fixed deposit or FD or using your savings bank account as security at the bank. 

Unsecured credit card – 

Unsecured credit cards are those cards that do not need any security deposit to avail the card. Such credit cards provide better benefits and perks than secured cards. However, you need to have a good credit record to qualify for the card. Based on your income as well as the policies of the financial institution issuing the card, you might obtain a credit card. Once approved, you would be offered a credit card limit, which you can use for transactions. 

When you apply for a card, it is important for you to compare distinct options to select the best-suited one. Look out for credit cards with favourable terms and conditions like low-interest rates and fees. Note that disciplined credit usage is the key to maintaining a good credit past record. Make timely repayments, keep your CUR (credit utilisation ratio) low and avoid having high outstanding balances on your card.

Also Check: Check Free Credit Score

Make use of your credit card periodically – 

Forming and maintaining a positive credit record requires constant effort and regular usage of your credit card. Here are some of the key points you must consider – 

Make regular transactions – 

To form a credit, ensure you perform constant transactions using the credit card. This can involve both direct and online transactions. Just by actively using the card, you can show the lenders you are disciplined at managing your credit properly. 

Keep your credit card active – 

In addition to performing transactions, engage in various other transactions that help in keeping your credit card in an active state. This can involve repaying dues, subscribing to the services, or setting automatic and timely payments. By keeping your card in an active state, you ensure a constant flow of credit info. 

Responsible usage – 

When using the card, it is important for you to perform disciplined financial behaviour. This means remaining within your credit card limit, avoiding excessive dues, and making the repayments in full and on time. Disciplined credit card usage shows your reliability and credibility to lenders and issuers. 

Timely payments – 

Repaying your credit card dues timely is crucial for maintaining a good score. Late repayments can have a negative impact on your past credit record and reduce your score. So, ensure to set up reminders on your mobile or automatic payment facility to make sure you never miss out on your repayment of loan dues and credit card bills. 

Keep your balances low – 

To enhance your credit card benefits, aim at keeping your balance on it low. A high credit utilisation ratio (CUR) can negatively impact your score. Strive at keeping your utilisation ratio less than 30 per cent to show your disciplined credit behaviour. 

Note that forming a positive credit record is a process, which is long-term, and needs constant effort. By using your card on a periodic basis and making timely repayments and ensuring to keep your balances on your card low, you can form a responsible track record. This translates to good credibility, enhances your chances of getting loan approval and gives way to a better financial future. 

So, now as you know why you must check your credit score periodically, ensure to note how you must check your credit score free online. To check your score through the online platform, you must visit an online lending marketplace. Such marketplaces fetch CIBIL, Experian, Equifax or CRIF Highmark reports monthly to allow you to understand your credit standing. 

In the case you do not hold a credit card, one of the best ways to form a credit is to opt for an add-on credit card. Here’s what you must know about the add-on credit card –

How it functions

When you turn into an authorised user, you can make use of the primary card user’s card to transact. However, it is crucial you remember that the primary holder of the card is ultimately responsible for the bill repayment. Your spending as the card’s authorised user might affect both your credit score and credit history, so it is crucial to use the credit card in a responsible manner. 

Choosing the correct family member

Ensure you ask a trustworthy and responsible family member like your parent, spouse, or sibling to include you in their card account. It is necessary to select someone with a positive credit record, showing responsible past credit behaviour. Once you avail the credit card, ensure you responsibly use the card and do not unnecessarily spend on items you do not need. Doing this may impact the primary cardholder in a negative way.

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