No credit to credit: 3 ways!

Your loan application is rejected because you don’t have any credit history? How do you build your credit history ? Well yes it’s a cycle of credit and credit again!

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

  • Apply for a secured credit card:

A secured credit card is a credit card that is backed by a savings account or by a deposit used as collateral on the credit available with the card . And gradually 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.

  • As an authorized user:  

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

  • 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. Whilst an aggressive lender with a higher risk appetite, could approve your credit application. Hence look for lenders where you may have a better chance.

Hope you build your good credit history with time and continue doing so. Ensure that you do not apply randomly for credit facilities as this indicates a credit hungry behaviour. And a high number of enquiries is viewed negatively by lending institutions.

About Author

Satish Mehta

Satish Mehta is a mortgage finance and credit information veteran with global and domestic experience of over 40 years. He runs a boutique consulting firm - Athena Advisors. He is a consultant to the World Bank Group and a Professor of Practice at the Ahmedabad University.