Does a Failed Credit Card Payment Pull Down Your Credit Score?

Rohan is browsing through his mail. He sees the monthly credit card bill sitting in his inbox, oh-so-proudly. It was his birthday month and his bank gave him a new credit card with a generous limit. And this leads to the crux of the matter: he crossed the planned budget! Now, he is contemplating if he should pay a partial amount this month and the rest next month or leave all of it for the end of the month, when he receives his salary.

He thought to himself, “What if I miss just one odd credit card payment? I am sure the bank will not mind!” Haven’t you too had this thought at some point in time? The honest answer is, they won’t mind you missing a payment… but they’ll add an interest to it. “But what about my credit score?” Rohan thought. As far as that is concerned, yes it will be affected.

Sometimes, missing a credit card payment might not be intentional; it could be because of a billing mistake or because of a financial crisis. But a lender does not look at it in favour of your credit history. It only shows that you, at some point in time, have faulted on clearing your credit card dues. A missed payment doesn’t only affect if it is your credit card, it can also affect your score on add-ons cards, where you take accountability of someone else’s expenses too.

Related Reads: 5 Things You Should Do When You Get A New Credit Card

How does a single missed payment affect your credit score?
When you miss paying your credit card dues on time, the interest added on it is compounded daily. So you can end up paying an interest of 3-4% per month depending on your credit card limit. The same applies to your outstanding amount when you pay the minimum amount. In short, if you do not clear your monthly credit card dues on time, you will see your amount blow up significantly and can increase your repayment period as well!

In such cases, lenders see you as an unfit borrower- someone who is more likely to default on timely payments.

Need a simple solution? Financial discipline!
Your score is calculated taking into account the last 24 months of your credit history. So that is how long it will take for you to mend your credit score for good if you end up missing on your timelines. Even so, these transactions will be visible on your credit history for 36 months.

In order to mend or rebuild your credit score, you will have to hold your end of financial well-being with absolute dedication. Ensure that you do not let a single instant arise that can have an impact on your credit score.

Ways to rebuild your score
To get back on track and raise your credit score, you have to be vigilant about the following things:

  • Make it a point to repay your debts and dues fully in time. A part payment indicates that you have difficulties in repaying but no problem in borrowing. So, do not let your outstanding debt snowball.
  • Consider taking a personal loan to repay your outstanding credit card dues. This way you will get rid of a compounding interest and end up clearing just one part of debt, your personal loan.
  • Avoid making any transactions on your credit card till your dues are cleared. This will appear to be difficult but it is for your financial well-being.
  • Keep a close check on your CRIF Personal Credit Report to follow-up on the developments and take stock of your next steps.

Having the freedom to spend more than your current affordability is very tempting till it becomes a huge snowball of debt. Avoid reaching that point with your credit cards and ensure that you pay your credit card dues on time. Missing even a single payment can affect your credit history badly.

Take stock of your financial history by pulling your CRIF Personal Credit Report and start making wise choices right now!

Should I Opt for Festive Season Loans?

Isn’t festive season the best time to cash on impulse? Consumers are already spending heavily either shopping, taking a holiday or planning a lifestyle upgrade. That’s why discounted loan advertisements become pretty hard to avoid! Before you opt for the festive schemes, offers and loan discounts, just keep your credit score and this quick read to in mind!

What’s in it for me?
Festive loans give you special waivers in the processing fees or lower interest rates for the loan tenure. Banks tie-up with several merchant segments like travel, lifestyle, automobile, real-estate, etc. to get you quick disbursement on loans for travel & holiday packages, home appliances, fashion, electronics, and accessories! Banks are thrilled to offer personal loans or credit cards within a day since they are unsecured, i.e. do not require collateral, which makes them easy to offer!

How does it work?
Loans are for a genuine requirement and a liability that needs to be paid back. The festive offers do make a lucrative bet, but make sure you read the underlying terms and conditions before riding on the debt wagon.

Related Read: What is a no-cost EMI and does it work in your benefit?

Need to Know!
Recently, RBI has clarified that the term “Zero interest” or “No-cost EMI” does not exist as banks or lenders only earn from the interest rates. So, they either charge you a lump sum when you are availing the loan, or give you a higher monthly EMI, perhaps charge you a higher processing fee. You will find kiosks outside banks offering ‘quick loans’, requesting you to fill up the application forms.

When you apply for a loan, the lender has the authority to pull out your credit report to check your loan eligibility. This is called a ‘hard inquiry’ and can knock off a few points of your score. If you do have to borrow this festival, make sure you don’t apply for several festive loans at once, anticipating which one will go through!

Good to Know!
Millennials today survive on debt, quite literally! Either with an ongoing car loan or a home loan, or at least a credit card. Paying in EMI’s instead of a chunk out of your corpus seems easier to sustain your lifestyle needs, but it’s important to know that you only own things when you pay them off completely. In the festive mood, loan discounts may seem like a savior in need, especially with living costs going through the roof. Ensure you do thorough research on the lender options and the type of loans you can apply for before you make a hurried application.

What should I do?
It is not uncommon to make big purchases during the festive season but it is essential that you know how much you need.

Analyze
Analyze your personal financial goals and the benefits it actually gives you instead of making low prices the sole reason to apply for it. Do you really need a car upgrade? Is a foreign journey on your to-do list? Have you been waiting to buy a home? Having a credit mix of loans, credit cards and other credit lines can boost your credit score and thus your creditworthiness but only if you make timely repayments on them. Hence, planning your finances for the credit repayment tenure is the first step towards managing debt well.

Prepare
Take a quick informative tour online and prepare the documents you require for the loan application like income statements, tax receipts, and identity proofs. Check how much income you are left with after you pay your credit card dues, household expenses and taxes to estimate loan EMIs beforehand, making it easier to pay off without hurting your monthly budget!

Check
Once you are ready with your research on lenders and loan types, give your credit score a quick check to confirm loan eligibility that’ll help you avail it effortlessly. A credit score is an important tool that lets lenders study your credit history through an automated report that determines your creditworthiness. If you are worried about a low score, here are ways to repair it before you apply.

You can check your free credit report with CRIF and prepare to make the festive season memorable by fulfilling your wishes!

How Different Types of Credit Can Boost Your Credit Score?

A credit score is calculated taking several factors into consideration; a statistical account of your creditworthiness & credit history. Borrowers are required to have a credit score of 700 or above to have the freedom to avail loans & apply for credit cards to meet their financial requirements.

Credit mix is basically the types of accounts that build your financial history and as a result, your credit score. Credit types that can be part of a credit mix include credit cards, mortgages, loans of any kind (student, personal, car or home). It constitutes 10% of the credit history as it indicates the different kinds of credit an individual can handle & repay back.

There are a total of 5 factors that affect your credit score:

1. Payment history: 35%
2. Amount of debt owed: 30%
3. Age of the credit history: 15%
4. New lines of credit: 10%
5. Credit mix: 10%

Related Read: Let’s answer 5 frequently asked questions about a credit score!

Different types of Credit you can have:

Credit is available for borrowers in 3 main categories:

– Revolving credit: These are credit lines with a monthly credit limit. It gets renewed as soon as you clear the previous dues. A borrower is allowed to utilize as much of the credit limit as per requirement in one go or in multiple transactions. It includes credit cards & home equity lines of credit, not very common in India.

– Installment credit: These lines of credit have a set installment to be paid across a predetermined time period. The loan payments are listed in an amortization schedule. As the borrower goes on to pay the installments one-by-one, it keeps reducing from the amortization schedule in the loan agreement. This line of credit includes student loans, home loans, auto loans, mortgages, etc.

– Open credit
: A credit line that is preferred by a few. Open credit lets the borrower use a fixed amount which should be paid back in full every month it is used. This type of credit is usually associated with charge cards, and not credit cards.

If it is good, should you overdo it?
Diversity is encouraged in the world of credit for the borrower’s benefit, but it is not a hard & fast rule. You can have even one line of credit & ensure that you make timely payments to clear it. The fact that it constitutes only one out of 5 parts of your credit report can help you remain at ease but it will help you only as long as you are able to repay it on time.

Having a mix of credit basically clarifies a borrower’s image in front of the lender. It demonstrates the ability of the borrower to pay back different kinds of credit lines, indicating that you are responsible. The potential lenders will view in a brighter light & see you as less of a risk.

How can you apply this to your credit score?
Building a good credit score doesn’t limit to only picking up different lines of credit, but it also includes your timely repayments & other historical data. A major part of it is the credit utilization ratio!

Since revolving credit is one line that most borrowers deal with on a day-to-day basis, it is vital to keep an eye on your credit cards & home equity lines of credit. Another reason to pay close attention to it is that it determines your credit utilization, which constitutes 30% of your credit score.

Repay your credit card dues each month & ensure that you keep a low balance on it to keep your credit utilization low, as a result of which your credit score will strengthen. Credit card limits keep increasing gradually and often land borrowers in debt. So make sure you don’t fall in that trap & maintain good credit utilization.

Take a look at which credit lines you’ve used & what can be added to your report by grabbing your CRIF’s Personal Credit Score here.

Will Settling a Debt Affect My Credit Score?

When we take up a loan, our first intent is to pay it back and clear it fully, but it also happens that some of us may not be able to repay the loan EMIs on time. In such a scenario, it becomes very difficult to decide what one must do. There is, however, one way that can get you out of the debt, which is by settling it with your lender. If you & your creditor reach an agreement, then you can settle the debt for a lower lump sum payment. So, you basically put an end to the debt by negotiating on the total loan amount. Hypothetically, say you have a loan of Rs 10 lakh and you are unable to pay the loan EMIs, then you & your creditor can enter an agreement to settle the debt for a one-time payment of Rs. 2 lakh.

Related Reads: 5 Practical Steps to Get You Out of Debt

Better than “Unpaid” but worse than “Paid as Agreed”
Your credit report maintains records of your loan EMI status & history of credit card dues. It lists whether you have paid your monthly dues & loan EMIs on time, before or after the due date. So, when you are done settling your debt with a lump sum payment, your creditor updates the status of the loan as “Settled” or “Paid Settled” on your credit history. It is definitely better than an “Unpaid” status update on your credit report, but it is not as good as a “Paid in Full” status, which would’ve been updated had you paid the full amount. Any status other than the latter can hurt your credit score.

In addition to settling your debt, there are other factors that can have an impact on your credit score. But, the degree of the impact of each factor on your credit score varies & cannot be identified accurately. Debt settlement can, nevertheless, have a noticeable impact on your credit score! When you opt for debt settlement, the account is not removed from your report immediately. If you made late payments while you were paying the loan EMIs, then this account will reflect on your report as a factor for 7 years, starting from the first date of late payment.

Lay the bricks of rebuilding your credit score after debt settlement
The credit score is a dynamic number that keeps changing depending on your financial activities & any score above 700 is considered to be a good score. If you are in a situation of not having paid your loan amount on time & this has affected your credit score, then you must start taking measures to rebuild it:

1. Ensure timely payments of all your dues hereon. In fact, make use of the auto-debit feature on your net banking platforms, so that money is automatically debited from your account as soon as you receive your monthly income. Your payment history is the most important component on your credit report.

2. Monitor & control credit utilization no matter how high is your credit card limit. Make it a point to set a limit of utilizing only 30% to 40% of your credit limit to keep your expenses under control. You can even set daily & monthly spending limits on your credit card. So, you can use this feature as well to make sure you don’t overspend & land in another situation of excessive debt.

3. Keep an eye on your credit score to see its progress. Tap the entries of all your transactions & evaluate your risk factors. Your report consists of the risk factors you are exposed to along with your score & this tells you what you must start improving first to ensure a healthy credit score.

Begin rebuilding your credit score by getting your free credit report from CRIF!

What Is The Difference Between Accessing Credit Score From a Bank and Online Websites?

Your credit score is a reflection of your credit habits as it provides the details on your outstanding loans and credit cards along with the outstanding and overdue amounts. Your credit score can be accessed through any of the following modes:

1. By Self – You can check your credit score through the websites of any of the 4 credit information companies operating in India. CRIF Highmark is the youngest of the lot and you can access your credit report by visiting the link – http://cir.crifhighmark.com. You can check your credit score through CRIF HighMark for free once every year.

2. By a Bank/ Lending Institution – Banks generally have an access to the credit information database being maintained by Credit Information Companies. So, when you apply for a loan or a credit with a bank or a lending institution, it will typically access your credit report to know your credit behavior and the health of your outstanding loans and credit cards.

3. By Loan Marketplaces – Loan marketplaces like BankBazaar, PaisaBazaar, IndiaLends etc. generally offer consumers a facility to compare and apply for loans or credit cards from different banks through a single application. In this process, these platforms may also access your credit score to check your eligibility for loans/ credit cards. They may also offer you to check your credit score free from the credit information companies they would have partnered with. Since the facility is offered free, many visitors may be tempted to use such services. However, it must be noted that such marketplaces may retain your data that you provided directly on their website as well as what is sourced from credit information companies with your due consent. All such data can be directed to remarket more products to you in future, and also to build internal analytics. As such, you must also carefully read the terms and conditions that you consent on such lending marketplaces to know how and what will they use your data for.

With regards to the safety of your data, it is worth noting that your data is generally transmitted through secure servers in an encrypted form when your credit score is checked across the portals. As such, the information kept in credit databases with credit information companies or in transit while being checked by banks/ lending marketplaces is safe and secure.

However, you must also be aware that there is always a difference between checking your score by self or through banks. Whenever your credit score is checked for a prospective loan/ credit card application, it is also recorded as a credit inquiry in your credit report. A higher number of credit inquiries reflects you as a credit-hungry individual to the bank and also has an adverse impact on your credit score. Instead, you may check your credit score directly through credit information companies and avoid any adverse impact on your credit score. Check your credit score with CRIF HighMark for free once in a year by clicking here.

Debit Card vs Credit Card: What Affects Your Credit Score?

Are you confused between a debit and a credit card? Although they look identical, their uses and features like reward points, EMI option and impact on credit score are distinctly different. Read on to know more about these differences.

Debit Card:

A debit card is directly linked to your savings account and can be used to make purchases. As long as there are funds in your bank account, you can use the card. The different types of debit cards are:
● Standard Debit Card: The money is directly withdrawn from your bank account.
● Prepaid Debit Card: It can be used to make purchases up to the amount pre-loaded on the card. It allows you to withdraw money without access to a bank account.
● Electronic Benefits Transfer (EBT): This card is issued by federal & state agencies to allow specific users to use some benefits to make purchases. Common benefits provided are food stamps and cash benefits.

Credit Card:

Credit cards are issued by financial institutions, typically a bank. The credit card holder is assigned a pre-determined credit limit to use money as a short-term loan by the credit card issuing company. When you apply for a credit card, you agree to pay the money back on a certain date according to the institution’s terms. There are four major types of credit cards:
● Standard Card: This a simple type of credit card offered by the bank.
● Secured Credit Card: It requires an initial security deposit to be placed on the card. The deposit you pay here is equal to the transaction limit of the card.
● Reward Card: It offers travel points, cash back, and other benefits.
● Charge Card: This card doesn’t have a preset spending limit, but the complete balance amount must be paid at the end of each month.

Major Differences Between Credit & Debit Cards:

The only similarities between credit and debit cards are they are almost identical in appearance. Both have 16-digit card numbers, an expiration date, and CVV codes. But, the objective and usage of both cards are different. Let’s look at the differences between them.
1) Impact on Credit Score: A credit card affects your credit score in 3 ways
Builds your credit history
Displays your repayment intent
Shows your credit behaviour

Building a credit history is a hidden benefit of using a credit card. Credit history is an important factor in your credit report and score. The simple logic is if you don’t have a history, how can you have a score? There are simply no parameters to judge you. Debit cards, since they rely on the amount actually in your account, do not count towards credit. So, using a credit card is a good way to build your credit history provided it is managed well. A well-managed credit card has a good payment history. This means that you don’t default on any of the monthly payments.

And, last but not least is your credit behaviour. Do you constantly maximise your credit limit? Is your credit utilisation ratio very high? This ratio is the percentage of actual credit usage out of your total limit. E.g, if your limit is Rs.1 lakh and you regularly use Rs. 80 k, your credit utilisation ratio is 80%. This shows a “credit hungry behaviour”, also viewed negatively.Such factors lower your credit score, create a negative impression in the eyes of lenders, and subsequently, such consumers will struggle to get a loan approval.

Related read— How To Find Your CRIF Credit Score – An Infographic

2) EMI Option: In debit cards, there is no concept of EMI because the entire amount is directly debited from your savings account. However, a few e-commerce sites and some banks are offering a debit EMI option, wherein you need to maintain a fixed/recurring deposit to avail this facility. When you purchase, your money is first debited from your bank account and subsequently reversed in two working days. This means you need to maintain the necessary balance at the time of the initial purchase. The debit card EMI starts after 30 days from the date of reversal.

Credit cards give you the facility to convert your purchases into EMI. But, you have to pay interest every month on the outstanding amount until your EMI is fully paid. You might also have to pay service tax and other additional charges. You may have an idea of using multiple credit cards to fund different purchases and increasing your total credit limit. But, before you hit apply, wait! Multiple credit cards, with high utilisation, will negatively affect your credit score. When you apply for a loan, banks check your credit history of each credit card you use.

3) Protection on Purchase: Both debit and credit cards have a PIN; hence, they are secured. A majority of credit cards have a liability protection feature, which makes them safe & secure from any unrecognized transactions or frauds. In addition, many banks provide a charge back feature, wherein an unauthorised transaction on a credit card is paid back to the cardholder. These features are not offered on debit cards. If you want such security, you can apply for the Card Protection Plan (CPP) and secure your debit card from any fraud or misuse. Unlike debit cards, credit cards offer‬ cashback and rewards such as ‭‬fuel points, air miles,‭ and ‬free gifts‭.‭

Conclusion: Credit cards can come with huge financial benefits if used wisely. They build your credit score and ease loan approval to fulfil your financial goals. But, before you swipe your next credit card, check your CRIF credit score here and monitor it regularly.

5 Major Ways Credit Cards Affect Your Credit Scores

Every transaction on your credit card affects your credit score. One of the factors that affects it is not paying your credit card dues on time. But, did you know applying for a new card or closing an old account can also negatively affect your score? Read on to understand how such common credit card habits can hurt your score:

● Use Credit Card to Create Credit History:
You can use credit cards not only to make purchases but also to establish a good credit history. If you have never availed a loan or used a credit card, you won’t have a credit score. Your credit report will give a score of -1 or NH (no hit). This means that lenders cannot determine your credit behaviour. Using a credit card is one of the simplest ways to start your credit history.The caveat is to build a good history. Pay off all your credit card dues on time every month to establish yourself as a responsible borrower.

● Delay in Credit Card Payments:
Your payment history is the most influential factor of your credit report. It makes up 35% of your credit score. If you are in the habit of missing out on paying your card dues, then you may be damaging your score. Moreover, any delays in payment are reported to credit bureaus like CRIF. To avoid the repercussions of late payments, and boost your credit score, get into the habit of paying your credit card dues fully every month.

Related Read: An Infographic on Ways To Maintain Your Credit Score

● Credit Utilization Ratio:
It is an indicator of the amount you have used out of the credit limit available to you. If you haven’t used your credit card and there is no balance, your credit utilization would be counted as zero. If you are applying for a loan, you need to carry some balance on your card. As a rule of thumb, you should maintain a credit utilization ratio of 30-40%. Anything higher than this may cause a dip in your credit score as lenders can attribute this as credit hungry behaviour. If you think you can efficiently manage your credit card dues, you can ask your bank to give you a higher credit limit on your existing card. Or, you can even apply for a new card with a higher limit. But, ensure that you don’t exceed your credit limit even if you are tempted to spend more.

Related Read: NO-HIT Or -1 Or No Score: Is It Bad? What’s The Best Way To Get Build A Credit Score?

● Applying for a New Credit Card:
Every time you apply for a new card, a hard enquiry is initiated on your credit report. This temporarily drops your credit score. Your score will recover after a few regular payments. Applying for multiple credit lines like credit cards or loans at the same time can hamper your score. Hence it’s always advisable to keep your credit card applications to a minimum. Apply only when it is really required. Whenever you apply for a credit card, draw a comparison between 2-3 cards. Based on your current credit score, pick the one that suits you the best. For example, if you shop a lot, then look for a card that offers good cashback. Similarly, if you travel constantly, a credit card that offers good air miles can be your choice.

● Closing a Credit Card Account or Discontinuing a Credit Card:
As your scores get affected while opening a new account, similarly, discontinuing an old credit card may hit your credit score badly. This is because credit history makes up to 15% of your total score. If you close an account that has been there for a long time, you are erasing all your credit life. Credit history is an important factor in your credit score.

Additionally, as you no longer have access to the credit limit of your card you closed, your credit utilization ratio will also drastically drop.So, make a wise decision before closing any old credit card. Instead of closing it, you may simply lower the usage of the card or keep it safe. This will not hamper your score. If you have multiple cards, you can close the most recent one.

To conclude, your credit card and other loans have a great impact on your credit score. Make sure you stick to the credit limit of up to 30-40% and adopt the aforementioned credit habits. If you haven’t checked your scores lately, make sure you review your credit report with CRIF.

How The Length of Credit History Affects Your Credit Score?

Your credit score is a significant determinant of your creditworthiness. The credit report contains a comprehensive record of your payment history, your credit age, and other factors which eventually determines your credit score. Among other factors, the length of credit history plays a meaty role. It accounts for 15% of your credit score. Hence, whether you’ve had credit for 6 months or 10 years can make a big difference in your credit score. You’re a much better candidate for credit cards and loans when you’ve had a long and positive credit history.

What Determines the Length of Credit History?

The credit scoring model looks at the age of your oldest and newest accounts to determine the average credit age. The age of credit history refers to the length of time you’ve been using credit. The length of time since your newest account was opened and the average age of all your accounts are also factored into the length of credit history. Several recently opened accounts can lower your average credit age and hurt your credit score.

How the Length of Credit History Affects Credit Score?

When making lending decisions, lenders review your credit history to determine how likely you are to repay your loan on time. A longer history shows you have more experience using credit and longer track record of repayment. In theory, the longer your credit history, the more accurate lenders can be in determining the level of risk they take on when lending to you. Do not stress out if you are just joining the league as the essential elements of a credit score is not just the length, but to pay your dues on time.

So How Do You Improve Your Credit History?

Do you know that you can check a free credit score on credit bureau websites such as that of CRIF High Mark? Well if you haven’t checked yet, you can do that first. In case you have never applied for a credit card or a loan in your name, your most likely reaction after viewing your score would be “why is my credit score -1 or NH or not available?”. Well don’t worry, it shows -1 or NH because you don’t have any credit history yet. This is your step 1 of building your credit score.

1. Start Early

You will have a good credit age only if you have enough credit history. Hence, although you may be in a position today where you seldom require a credit card, it would be advisable to own one. In this way, your credit history will be established at an early age and would help improve your credit score. Later, when you are actually in need of a loan, you can use this to your benefit.

2. Pay Your Dues on Time
Good credit history is what lenders are looking for. So, if your credit history indicates that you’ve missed payments or over utilized credit cards, a long credit history might not help. On the other hand, if you have a long history of timely payments with a low credit utilization ratio, it shows that you are responsibly managing credit and are worth the risk for lenders. This means that when a lender performs a credit check, you could be more likely to be approved for credit cards and loans at a better interest rate.

3. Retain Older Credit Accounts
Since credit age is all about how old your payment history dates back to, It’s worth considering old credit accounts with a decent track record before closing them. Generally, the longer an account has been open and active, the better it is for the credit score. That’s particularly true for an account with positive payment history, without any delinquency. They surely add to your overall creditworthiness. Having said that, Even when you close a credit card, it will stay on your credit report and continue to reflect for around 7 years.

4. Limit Loan Applications
Applying for multiple loans with multiple banks indicates credit hungry behavior. Also, each time you apply for a loan, the bank conducts a hard inquiry on your account, a number of which hampers your credit score. It also does not help with your credit history length as the average age is reduced due to the opening of simultaneous accounts.

5. Check Your Credit Score Every Once in A While

Regular checking of your credit score is known as a soft inquiry. It does not affect your credit score in any way and is rather a good and harmless practice to keep a track of your progress. Although, overdoing the same is not recommended as it may lead to anxiety and worry. You can check your Credit score for free from CRIF services.

NO-HIT Or -1 Or No Score: Is It Bad? What’s The Best Way To Get Build A Credit Score?

If you have never ever availed any loans or possessed any credit cards in India, you will not have your records with any of the credit information companies – therefore no credit history. As such, when you will try to check your credit score from any of the four credit bureaus, you will get a score of -1 or no score (also called No Hit or NH cases).

Is -1 or NH bad? If one doesn’t have any credit history, a bank or a NBFC lacks information from one credible source so it becomes difficult for them to take a decision on your loan application. The lender, in absence of a credit score, will use alternative mechanisms to assess your application and therefore may take longer to decide or may even reject an application. Having a -1 or NH score isn’t bad by itself, it is a genuine condition for a youngster who is starting with the first job or a housewife who is looking to be a co-applicant for a housing loan with her husband.

For a person with no credit history in India, what’s the best way to get started?
If you would like to build your own credit history and get yourself a credit score, you will have to begin by taking a loan or a credit card and use it effectively over some time. Here are a few simple ways by which you can build a credit history:

1. Apply for a Credit Card with your Existing Bank: You can apply for a credit card with the bank with which you have an existing relationship like your salary account. As the banks are generally inclined to offer additional facilities to its existing customers, the absence of a credit history may not bother much to them. Go for the most basic credit card on offer to begin with. However, you may get a lower credit limit in such cases, but nevertheless, your credit card is there and so is your credit history. Further, once you have a credit card, make sure to pay off the credit card dues well in time as regular repayments will translate into a better score for you. Do not spend too much, limit your utilization to 30–40% of the card limit.

2. Apply for a Secured Credit Card: if the first option doesn’t work out for you, you can deposit a small amount say 30K into a Bank FD, and apply for a “secured” credit card against the deposit. The bank will assign you a credit limit of up to 80% of the deposit amount. This is generally a good starting point for even self-employed and professionals.

3. Apply for a Small Ticket White Goods Loan: You may also purchase your next smartphone, TV or laptop on EMI by applying for a small consumer durable loan/ EMI loan. The financiers are available on most large format electronics retail stores as well as on the online e-commerce websites. Consumer Durable Financiers are more comfortable approving loans for customers with no credit history, and the approvals are also almost instant. The good news is that these loans are usually zero cost EMI loans.

4. Apply for a Secured Personal Loan: Most of the banks can offer you a personal loan against the security of your existing term deposits (loan against deposits). Since the term deposit is generally enough to cover the personal loan amount along with interest for a reasonable period, banks may not check your credit report and sanction you a personal loan. Usually, such personal loans may be lighter on your pockets too, as such loans typically carry an interest rate of your FD rate plus 1-2% and FD rates are presented in the range of 6-8%. So, the effective interest rate can be 7-10%.

As they say, ‘Rome was not built in a day, neither will your credit history be.’ It may take six months or even a year depending on how well and often you use and handle credit. However, ensure regular repayments of your loans and credit cards, so that you have a good credit score, reflecting good credit habits. Further, once you have a credit history and a credit score, make sure that you manage your loans and credit cards smartly.

Become A CRIF Credit Score High Achiever – An Infographic

Uh oh…remember when a 650 credit score was deemed sufficient to secure the best rates and terms on credit cards, auto loans, home loans, and so on?Well, not anymore! You can also the join the club of high credit score by simply following the practices listed on our infographic and climb all the way to become an achiever.

CRIF Credit Score