There are many things a lender considers before giving out loans to someone requesting it. At the very top of that list would be vetting the potential borrower’s credit history. A good credit score, or creditworthiness as some would like to call it, indicates a borrower’s capability to pay the loan amount back in time.
This goes without saying then that you’ll need to show a good credit score to increase your chances of getting a loan. That said, what if you have no history of borrowing money? If you’ve never borrowed money in your life then you do not possess a credit score. So naturally, any lender would hesitate to give out loans to someone who has no past repayment behavior to showcase.
Fortunately, there are ways by which you can build your credit history despite having no pre-existing loans to your name. That is what we will be focusing on in this little article today. So, without much further ado, allow us to acquaint you with a few tips that can help you build a solid credit history in no time.
1. Get a Low-Limit Credit Card
Getting a low-limit credit card from your bank and using it to make your purchases either via online payments or PoS machines is a great way to build one’s credit history. There are two things you should pay heed to, however, if you choose to take this route.
First, ensure your credit card utilization ratio is below 30%. Second, try to pay the credit card bill in full before the due date.
2. Get Secured Card
Some banks offer credit cards to clients based on their fixed deposits. The FD actually serves as collateral if the client ends up defaulting on payments. The limit of this card will also depend on the amount of investment made.
So, if your fixed deposit amount is 50000, then the credit card issued to you will also be of the same amount limit. When you get this card, simply ensure that the repayment is done on time, thus boosting your credit score.
3. Buying on EMI
Another very effective way to build your credit history is by buying products on EMI. Repaying the monthly installments back on time will definitely add up to your credit score, which you can show to a bank or any other lending entity to get a loan without hassle.
The Bottom Line
The above three tips are an easy way to build a credit history. Besides them, we suggest you adhere to the following pointers to make sure your credit score is maintained;
– Do not default on your loan repayments
– Do not delay credit card payments
– Never max out on your credit limit
– Refrain from closing your old credit cards
Regardless of what type of loan you seek, your credit history will play an instrumental role in helping you successfully secure it. For more tips like the above, we suggest you give us at Findestination a call.