Building a good credit score without using a credit card is achievable with consistent fiscal practices and financial discipline. Instead of using credit card history to prove that you have a strong credit profile for future borrowing needs, you can instead show that your fiscal habits are in line with the creditworthiness requirements of banks and NBFCs.
A clean credit profile will be useful when you apply for a credit card, home loan, mortgage or personal loan in the future; and is possible through proper planning.
What is credit score? How is it evaluated?
Your credit score is a three-digit number, determined by your past credit behaviour. It indicates to lenders that you are financially responsible. Lending institutions often assess the creditworthiness of aspiring borrowers using the 5 C’s of credit.
- Conditions: This examines the purpose of your loan application and the financial conditions that could impact repayment on your part. A part of this is the conditions that define how the loan will be repaid and resolved in case of any dispute.
How can I build credit without a credit card?
Here’s how you can start:
The goal is to showcase responsible fiscal behaviour through repayment of other financial obligations such as EMIs, bills and loans.
How can I access my credit report?
Credit bureaus such as Equifax, Experian, CIBIL and CRIF High Mark provide credit reports. As per regulatory requirements, you are entitled to one free credit report each year. You can access this to monitor and review your credit score.
Notably, your credit score will improve gradually over a period of six months to a year, following responsible repayment patterns.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
