Your credit score is a number used by lenders to determine your creditworthiness. It is determined by your credit history, which includes your payment history, credit utilisation ratio, and credit history length. A good credit score can help you qualify for lower interest rates and credit cards, which can save you money in the long run.
If you have no credit history, or if your credit score is low, it may take some time and effort to build it up. You must remember that everyone starts somewhere, and building credit is a process that takes time.
In this post, we will go over the fundamental procedures to build your credit score, ensuring that you have the information on the fastest way to build credit from scratch you need to make sound financial decisions. At Shriram Finance, the importance of your financial well-being is recognised to help you build credit from scratch.
Your credit score is a financial compass that guides your access to various credits. If you are looking for a reliable financial partner, consider Shriram Finance with its expertise in offering several loans. We can help you navigate the world of credit, offering tailored solutions to meet your needs and improve your credit health. Do not let credit mistakes hold you back and partner with Shriram Finance for a brighter financial future. If you are looking to avail of a personal loan. Apply here.
Why It is Important to Build Credit?
Building credit is not just about securing loans or credit cards, but also about financial freedom and opportunities. A good credit score can help you access lower interest rates, qualify for higher credit limits, and even land your dream apartment or job. Establishing credit is the foundation of a stable financial future.
How to Build Credit from Scratch?
If you have no credit history, here are a few things for the fastest way to build credit from scratch:
Apply for a secured credit card: A secured credit card is backed by a cash deposit, which is usually equal to your credit limit. This type of card is a good option for people with no credit history or bad credit.
Include Your Name in an Add-on Card: If you have a friend or family member with good credit, you can ask them to add you as an authorised user on their credit card. This will allow you to build a credit history without being responsible for the debt.
Get a Credit-Builder Loan. A credit-builder loan is a small personal loan that is designed to help you build credit. The loan is typically repaid for 12 to 24 months, and the payments are reported to the credit bureaus.
Apply for a Secured Credit Card
A secured credit card is an excellent starting point. Unlike an unsecured credit card, it requires a security deposit, which serves as collateral for your credit limit. Make small, manageable purchases, and pay your balance in full each month. This demonstrates responsible credit use and helps boost your credit score over time.
Include Your Name in an Add-on Card
If you have a family member or friend with a credit card, ask them to add you as an authorised user. This can help you piggyback on their good credit history, improving your score. However, ensure that the primary cardholder has responsible credit usage behaviour.
Get a Credit-Builder Loan
Credit-builder loans are specifically designed to help you establish credit. These loans work by holding the loan amount in a bank account while you make payments. Once you have completed the payments, you receive the full loan amount. This helps build a positive payment history, a critical factor in your credit score.
How to Achieve and Maintain a Good Credit Score?
Building credit is one thing, but maintaining a good credit score is equally important. If you have started building credit, here is how you can achieve and sustain a healthy credit score:
Consistent Payments: Pay your bills on time, every time. Your payment history makes up a significant portion of your credit score.
Credit Utilisation Ratio: Keep your credit card balances low. Aim for a credit utilisation ratio of below 30%.
Diversify Your Credit: Having a mix of credit types, such as credit cards and instalment loans, can positively impact your credit score.
Regularly Check Your Credit Report: Monitor your credit report for errors and discrepancies. You can access one free report from each of the three major credit bureaus annually.
Avoid Opening Too Many Accounts: Each credit inquiry temporarily impacts your score, so be cautious when applying for new credit.
Conclusion
In conclusion, building your credit score from scratch is a strategic move towards securing a financially stable future. At Shriram Finance, we are here to support your journey to financial success. Remember, responsible financial habits, like those discussed in this article, can make a significant difference in your credit score and overall financial well-being.
Ready to take the first step toward building your credit? Shriram Finance understands the importance of maintaining a good credit score. It offers a wide range of credit solutions tailored to meet the needs of individuals and businesses. Our suite of loans includes business loans, personal loans, commercial vehicle loans, used car loans, two-wheeler loans, car loans, etc. We provide both FIP and fixed deposits.
Key Highlights
- To build credit from scratch, you require patience and responsible financial habits
- Become an authorised user on an existing credit card, apply for a credit-builder loan and maintain responsible credit habits, such as timely payments and low credit utilisation to establish credit, even if you are starting from scratch.
- A new credit inquiry can temporarily impact your score, so be cautious when applying for new credit.
- Consistent payments, low credit utilisation ratio, diversification of credits, and regularly checking your credit report can help maintain a good credit score.
