You’ll undoubtedly need credit at some point in your life unless you have enough cash to cover all of your expenses for a lifetime. A quick CIBIL score check will let you know your credit score which will help you receive better interest rates whether you need to borrow money or establish a business, get a car loan, buy a property, etc.
However, getting a high credit score is not always simple. It often takes some time and effort to improve negative credit or build one from scratch. The difficulty of having no credit at all is almost more of a hurdle. Why? Because lenders do CIBIL score check and are particularly hesitant to lend money to someone whose capacity to repay has not yet been established.
If you haven’t yet established your credit score, there are many proven ways you can build your CIBIL score, CIBIL full form is Credit Information Bureau (India) Limited. Credit cards are certainly one of the first things that come to mind when you consider how to build credit. And while carefully using a credit card is the best way to establish your credit, it’s by no means the only strategy that works. Even a decent or excellent credit score is possible without a credit card. Any credit product that is reported in your name to the credit agencies helps you raise your credit profile. Continue reading to learn how you can build credit without applying for a credit card.
Option 1- Borrow a small amount of money from your bank: Check first with your bank to see if you qualify for a small, personal loan. If you do, only borrow the amount required for a major purchase you were already planning to make—or a smaller sum you are confident you can repay over time. All you need to do is make sure you pay back the Equated Monthly Instalments (EMIs) on time each month. Once you’ve gotten a loan of smaller value, you should prioritize paying it back. If you complete your monthly payment on time each and every month, this form of loan is probably the greatest option for helping you establish a CIBIL score, CIBIL full form is Credit Information Bureau (India) Limited, or raise your credit score. Your credit score will rise once you eventually repay the whole loan amount. The main thing to keep in mind is that your interest rate for a personal loan will be based on your current credit score. In the current scenario, it will be higher; however, paying your loan on time will result in future interest rates being lower.
Option 2-Car Loan: Purchasing an automobile is one of the most typical indicators of personal or professional growth in India. You should use this transaction as a chance to improve your credit or CIBIL score, CIBIL full form is Credit Information Bureau (India) Limited or raise your credit score. Instead of paying cash for your new car, get a minimum personal loan so that you can make the required repayments on time.
Option 3- Get consistent with paying the pending EMIs on your current Loan: If you have previously obtained a personal loan to fund your child’s further education, or to get a new phone, arrange for a wedding, organise a family trip, or upgrade your home, you must concentrate on making on-time EMI payments to your lender. Always keep in mind that for sound credit score management, your debt-to-income ratio must be kept below a solid 30%. Make sure you develop the habit of integrating your EMI system into your monthly salary and savings system so it will be simple for you to organize your finances. In this manner, if necessary, you will prioritize your EMI repayment needs over your personal expenses.
Option 4- Utility Payments: Bills that are past due and unpaid on time could lower your credit score and will affect the score when you do a CIBIL score check. You should take good care of your recurring bills because they can affect your situation. In general, these utility payments don’t directly affect your credit report, but if you don’t make them on time, your account may be transferred to collection agencies, who then report to credit bureaus, which might harm your CIBIL score; CIBIL full form is Credit Information Bureau (India) Limited and credit worthiness.
Now that you have established your credit history, do ensure you keep the score high through these tips:
- Avoid making late fees: Delaying any loan or credit card EMI instalment has a bad impact on your CIBIL score and the same will be reflected on your CIBIL score check. Thus you should avoid doing so. By setting up reminders, auto-paying instalments, and creating monthly task sheets, people can prevent late payments.
- Do review your CIBIL report from to time: This is the element that has the most impact on CIBIL score or CIBIL full form is Credit Information Bureau (India) Limited A person can verify their credit report for mistakes or inaccurate information. One can file a dispute and have the issue(s) fixed if there is any mismatch in the name or if a changed address has not been updated.
- Keep Credit Utilization Ratio stable: The individual should keep their credit utilization ratio around 30% of their total credit limit. By distributing the cost of spending among a number of credit products, this goal can be reached. Your credit score will increase and be maintained as a result of reducing your credit use ratio, which will ultimately help you and increase your financial security.
- Manage a credit mix: Unsecured loans, such as personal loans, business loans, and student loans, are frequently cited as the main cause of low credit scores. In comparison to secured loans like a home loan or an auto loan, the risk associated with these loans is substantially higher because they are approved without any form of security. Always choose a variety of credit products to keep a decent credit score because doing so balances the risk factor and results in a higher credit score. Banks tend to issue loans faster if an applicant has a healthy mix of credit because they won’t be viewed as high-risk borrowers.
Increasing your credit score is a slow and gradual process.
If you can make one of these solutions work, you should soon be on your way to a higher credit score. Just keep in mind that it’s crucial to take the procedure of establishing your credit score and building it over time seriously and pay all of your payments on time each and every month, regardless of the situation. Your credit score is influenced by a number of factors, including your repayment history, total defaults, debt-to-income ratio, past credit borrowing history, and more. Making your payments on time is one of the best ways to improve your credit score without using a credit card. While it’s true that a string of on-time payments can raise your score, it’s also true that a handful of late payments can undo the efforts you’ve made.