Second-year engineering student Vineet Mishra is planning to buy a motorbike next year. As he inquired about credit, he learnt the concept of credit score, which is the benchmark of a customer’s creditworthiness. When he did some research on social media, he discovered that it was far more important than he ever knew.
Not only Vineet, but a credit score is profoundly important for anyone and everyone. From raising a small loan to applying for a credit card, it plays a key role in securing a good deal with the bank. Lenders typically turn down the loan applications of those applicants whose credit scores are abysmal, whereas applicants who possess high credit scores are generally offered loan deals on convenient terms.
Even if you have not started to earn, you should try to maintain a good credit score.
Why is it important for students?
Limited credit history: Students often start with no credit history, so building a positive record early through a credit card establishes a strong foundation.
Future purchases: A good credit score will be important for major life milestones after graduation, such as buying a car, purchasing a home, or starting a business, which requires loans.
How students can build a good credit score
Get a student card: Use it for small, manageable purchases, paying the balance in full each month to avoid interest and build payment history.
Pay bills on time: Timely payment of credit card bills, phone bills, or even small loans (if applicable) is critical, as payment history is a key metric of credit score.
Keep credit utilisation low: Use less than 30 per cent of available credit (e.g., if your card limit is ₹2 lakh, keep balances below ₹60,000).
Become an authorised user: If your parents have good credit, getting added to their credit card account can help you build your credit score, as long as they maintain responsible habits.
Avoid multiple applications: Applying for several credit products in a short time can lead to hard inquiries, which may temporarily lower your score.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
