6 Ways to Build a Good CIBIL Score for Beginners

A CIBIL score is a three-digit number that is a deciding factor for lenders to lend you money. The higher the score, the better your chances are for loan or credit approval. It is important to check your CIBIL score as today, every aspect of our lives is impacted by it – from starting your own business to buying a home. This article guides first-time credit users to build an amazing credit score.

How to Build Credit Score from Scratch?

If you are new to the financial world and do not possess a credit score, here are six smart tips on building it right from scratch!

• Apply for a Secured Credit Card

When you are trying to get your credit score high for the first time, signing up for a secured credit card is a great way to begin! They are like normal credit cards; however, you must put an asset as collateral to get it.

• Get a Credit Card Where You Have Your Salary Account

Since you already have a relationship with the bank your salary account is opened at, they are in a better position to provide you with an unsecured credit card.

• Don’t Apply for Multiple Credit Cards

Every time you apply for a credit card, it negatively impacts your credit score. So, if you are trying to level up your score or are building it from scratch, it is recommended not to sign up for multiple credit cards at once. This will make the lenders think you are hungry for credit and even reject your application.

• Consider a Consumer Durable Loan

Consumer durable loans are a special category of personal loans used for purchasing household appliances and electronic gadgets like smartphones, laptops, televisions, washing machines, etc. They are smaller and can be easily repaid within a logical timeframe.

• Utilise the Buy Now, Pay Later Option

This popular concept is soaring in the e-commerce world. The BNPL model is considered a credit facility as it gets reported to the credit bureau. It works as a loan on the product you purchase by paying a down payment and the rest can be paid with short, mostly interest-free instalments.

• Access Credit Responsibly

A salaried employee receives tons of enticing offers on credit cards with great benefits and high credit limits. But the real question is, do you really need that many cards at once? Whether you use them or not, you must be responsible enough to understand your needs. So, make sure you apply for cards only when you need them and use them wisely, so they fall in your favour and help you build a strong credit history.

What to do Once You Establish a Good Credit History?

Once you have built great credit history and maintained a good score, it’s time to maintain it by building healthy credit habits that leave you with an excellent credit profile for continued access. Here are some tips you can follow:

• Keep Track of Your CIBIL Score

Checking your CIBIL score yearly is free, and very few people take advantage of this facility. You need to keep track of your CIBIL score and regularly report to understand where you need to improve and which good habits you should hold on to.

• Monitor Your Credit Utilisation Ratio

Every credit card has a utilisation limit that varies depending on your CIBIL score. Monitoring this limit and ensuring you don’t exceed it is important for a well-maintained credit score.

• Apply for Debt Only When Needed

Some purchases can be avoided until you can fund them yourself. For such expenses, it is better not to take loans or credit and decrease your CIBIL score.

• Pay Your Balance Full and On Time

Paying credit cards in full instead of leaving half for later is a good habit. This avoids additional charges for late payment. Also, ensure you make timely payments.

And Lastly…

Building a great credit history takes time. So, to build and maintain a good one, you must form and follow healthy credit habits! Hope these tips help you build a good credit score from scratch and help you maintain it.

Author Bio:

Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected].