April 28, 2025 · 22 mins read
Santhosh Kumar
If you’re fairly beginning out with your accounts in India, one of the most intelligent steps you can take is to build credit from scratch. In today's advanced and credit-driven economy, having a solid credit history is not a fair advantage—it's nearly a need. Whether you're applying for a domestic advance, buying a car on EMI, or indeed attempting to get a postpaid SIM card or lease a loft, your credit score can impact the result. Numerous youthful Indians figure this out as it were when they're denied credit for the beginning with time, not since they have terrible credit, but since they have no credit history at all.
Whether you're an understudy, a youthful proficient, or somebody who's never utilized credit sometime recently, having a credit history is fundamental. It makes a difference if you qualify for advances, credit cards, better-intrigued rates, and certain occupations or rental homes.
But the enormous address is: How do you build credit from scratch when you don't have any credit history? Luckily, there are common and successful ways to begin if you're beginning from zero.
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Building credit isn’t as complicated as you may think. Below, we’ll explore techniques on how to build up your credit, including:
1: Open a credit card
2: Become an authorized user
3: Get a loan
4: Use a cosigner
5: Become an Authorized User on Someone Else’s Credit Card
6: Have a good credit mix
7: Learn good credit habits
Opening and using a credit card is one of the most common ways to build credit. But there are a couple of different types of cards you can choose from, some of which are designed for those who don’t have a credit score yet:
Secured credit cards: These cards are designed specifically for people starting to build their credit. To open a secured credit card, you must submit a security deposit to the issuer upfront. This deposit is collateral if you don’t pay your bill and typically represents your credit limit.
Once opened, you’ll use a secured credit card just like a regular credit card: you’ll buy things, make timely payments, and potentially earn interest if you don’t pay your balance in full on time. Responsible use of a secured card can help you graduate to an unsecured card with higher limits and more benefits in the future.
Student credit cards: If you’re currently enrolled in college, student credit cards can be a good option to start building credit. These cards are designed with students in mind and often have lower credit requirements than traditional cards. Some of the perks you might find with student
Credit Cards include: Cash back or rewards: Earn money back on everyday purchases or points towards travel and merchandise.
Cell phone protection: Get reimbursed for repairs or replacements if your phone is damaged or stolen (with certain conditions).
Building credit history: Responsible card use establishes a positive credit history, which is important for future financial goals.
Retail credit cards: Department stores or specific brands offer these cards. They’re often easier to qualify for than other types of credit cards, even if you have limited or no credit history. However, there are some trade-offs:
Limited use: These cards are usually only used at the affiliated store or within a specific brand network.
High interest rates: Retail cards often have higher interest rates than other cards, so paying your balance in full each month is important.
Tempting discounts: While they may offer enticing discounts or rewards on purchases, these can lead to overspending if you’re not careful.
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Becoming an authorized user on a parent’s credit card (assuming they have good credit and the card issuer reports authorized users) can be a great way to start building credit at a young age. When you’re an authorized user, you can receive a credit card in your name that’s connected to your parent’s account.
As the primary cardholder practices responsible credit habits like making on-time payments and keeping a low credit card balance, their positive credit behavior will reflect on your credit report and help you build a strong foundation.
It’s important to remember that irresponsible habits by the primary cardholder, such as missed payments or maxing out the card, could also impact your credit as an authorized user. Before becoming one, clearly discuss expectations for using the card responsibly with the primary cardholder.
While becoming an authorized user can help you kick-start your credit, consider opening your own credit card account once you have a foundational score to establish credit more effectively and boost your score faster.
Taking out a loan can be an effective way to build credit, as lenders like to see a mix of credit accounts on your report. But it’s essential to choose a loan that fits your needs and financial situation, and to prioritize responsible borrowing. Here are some loan options that can help you build credit:
Student loans: If you’re enrolled in college, student loans can help cover tuition and other expenses while contributing to your credit history. Make payments on time to show your ability to manage debt responsibly.
Auto loans: Buying a car with an auto loan can be a good way to build credit, especially if you have a down payment and can afford the monthly payments. Regular, timely payments on an auto loan can positively impact your credit score.
Secured loans: These loans are backed by collateral, such as a savings account or certificate of deposit. This lowers the lender’s risk, making them easier to qualify for even with a limited credit history.
Credit-builder loans: These loans are specifically designed for building credit. You typically don’t receive the funds upfront - instead, the lender deposits them into a savings account. You make regular payments over a set period and once finished, you receive the funds plus any interest earned. This creates a positive payment history on your credit report.
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Using a cosigner - someone who agrees to share legal responsibility for the debt with you - can improve your chances of loan approval, especially if you have no credit history, a low credit score, or lower income.
A cosigner with good credit can help you secure better loan terms, potentially saving you hundreds of dollars in interest over the life of the loan. They can also help get you more flexible repayment options. Also, having a cosigned loan and making timely payments can help you build or improve your credit history, as the account will appear on your credit report.
However, using a cosigner comes with some risks and extra responsibilities. Both you and the cosigner are equally responsible for repaying the loan, meaning that if you fail to make payments, the cosigner must legally cover them. This shared responsibility can put pressure on personal relationships and negatively impact both parties’ credit scores if payments are missed. Late or missed payments on a cosigned loan damage your credit and can significantly harm the cosigner’s credit score, making it harder for them to borrow in the future.
Before asking someone to be a cosigner, discuss your repayment plan, financial responsibilities, and the potential risks for both of you.
A good credit mix: the variety of credit accounts you have on your credit report—can help build your credit by showing lenders that you can responsibly manage different types of credit. This includes both revolving credit, like credit cards and lines of credit, and instalment credit, like mortgages, auto loans, and personal loans. Credit mix accounts for about 10% of your FICO credit score, so having both types can boost your overall score.
Managing different types of credit over time and maintaining a consistent history of timely payments helps you establish a stronger credit history. Lenders often view a diverse credit mix favourably, as it shows you can juggle multiple financial responsibilities. However, it’s important to open new credit accounts only when necessary and avoid too many credit applications, as they can negatively impact your score.
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If you don’t have a credit card of your own, one effective way to build credit is by becoming an authorized user on a family member’s credit card. Here’s what you need to know:
How it works: When you become an authorized user, you can use the primary cardholder’s credit card to make purchases. However, it’s important to note that the primary cardholder is ultimately responsible for paying the bills. Your spending as an authorized user may impact both your credit history and the credit score of the primary cardholder, so it’s crucial to use the card responsibly.
Selecting the right family member: To become an authorized user, ask a responsible and trusted family member, such as a spouse, parent, or sibling, to add you to their credit card account. It’s essential to choose someone who has a positive credit history and demonstrates responsible credit behavior.
Benefits and risks: Being an authorized user can provide you with an opportunity to build credit and establish a credit history. As the primary cardholder’s payment history and credit limit are reported to credit bureaus, your credit profile can benefit from their positive credit management. However, it’s important to use the card responsibly to avoid damaging the primary cardholder’s credit and maintaining a good relationship with them.
Communication and transparency: Before becoming an authorized user, have an open conversation with the primary cardholder. Discuss your intentions, responsibilities, and the importance of using the card judiciously. Establish clear guidelines and ensure that you both understand the potential impact on credit scores.
Limitations and alternatives: While becoming an authorized user can be a valuable strategy, it’s important to note that it may not be an option for everyone. Some credit card issuers may not allow authorized users without an existing credit history. In such cases, exploring other avenues to build credit, such as secured credit cards or small loans, can be viable alternatives.
Remember, responsible credit usage is crucial even as an authorized user. Use the card for small purchases, make timely payments, and avoid carrying high balances. By demonstrating responsible credit behavior, you can establish and strengthen your own credit history over time.
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Creating good credit habits is the foundation of building and maintaining a strong credit score. Here are a few tips on how to establish those habits.
Prioritize on-time payments: Consistently paying your bills on or before the due date is one of the most important factors in building good credit. Your payment history accounts for roughly 35% of your FICO score, so even a few late payments can significantly pull it down. Utilize automatic payments, calendar alerts, or reminder apps to keep due dates front and center, ensuring timely bill payments every time.
Maintain a low credit utilization ratio: Credit utilization—the amount of credit you use compared to your available credit—is the second most critical factor in your credit score (about 30%). Aim to keep your credit utilization below 30% on each card and overall. This means if you have a $1,000 credit limit, try not to have a balance of more than $300. Paying your balance in full each month is ideal.
Monitor your credit reports: At least once a year, check your credit reports from all three major credit bureaus: Equifax, Experian, and TransUnion. You can check your TransUnion and Equifax reports for free with Credit Karma. You can check your Experian credit report a few different ways, including directly through Experian or via freecreditscore.com (an Experian-owned service). Checking these reports lets you catch errors, spot signs of identity theft, and track your progress.
Apply for new credit sparingly: Each credit application triggers a hard inquiry on your credit report, potentially causing a small, temporary dip in your score. To minimize this impact, apply for new credit strategically—only when you truly need it and are likely to be approved.
Don’t close existing credit cards or accounts: Preserve your credit history by keeping older accounts open. Even unused credit cards can be valuable assets. If they don’t carry annual fees, keeping those older accounts active can boost your credit longevity and increase your score.
Patience and persistence: Building a solid credit score is a marathon, not a sprint. It requires consistent effort and patience. Remember, setbacks happen, but don’t let them derail your progress. Instead, focus on cultivating positive financial habits like making payments on time, managing debt wisely, and using credit responsibly.
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Building credit takes exertion, and dropping into traps that can delay your advance or harm your score is simple. Here are a few botches you ought to effectively avoid:
Missing instalments or paying late: Installment history is the single greatest figure in your credit score. One missed or late instalment can remain on your report for a long time and decrease your score.
Overusing your credit limit: Excessive use signals to moneylenders that you may be monetarily pushed. Continuously point to using less than 30% of your credit limit.
Applying for numerous credit items at once: Each application creates a difficult enquiry. Applying for numerous credit items in a brief span makes you appear frantic for credit.
Closing ancient credit accounts in great standing: More seasoned accounts offer assistance to build the length of your credit history. Keep them open unless there's a solid reason to close.
Ignoring your credit report: Mistakes or false movements can go unnoticed if you don't audit your credit report routinely. Checking your report lets you spot and settle issues early.
Avoiding these mistakes makes a difference: You keep up a clean and solid credit record from the beginning, giving you a steady foundation for future money-related objectives.
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To build or make strides in your credit score, it's imperative to understand how credit bureaus in India work. The RBI authorizes four fundamental credit bureaus:
1: CIBIL (Credit Data Bureau India Limited)
2: Experian India
3: CRIF Tall Mark
4: Equifax India
These offices collect and maintain credit data from banks, NBFCs, and other moneylenders. Each time you take an advance, make a credit card installment, or default on an EMI, the data is detailed for these bureaus.
Each bureau has its possess calculation to compute your score based on information focuses like:
1: Payment history
2: Outstanding balances
3: Number of accounts
4: Credit blend (secured vs. unsecured)
5: Recent credit enquiries
Although all credit bureaus perform the same work, your score may change marginally between them due to contrasts in information announcing and scoring models.
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Your credit report is more than fair. It contains point-by-point data about your credit conduct. Here's what you'll ordinarily discover in an Indian credit report:
1: Personal Data: Title, address, Dish, Aadhaar (now and then), date of birth, etc.
2: Account Points of interest: Dynamic and closed credit cards, credits, EMI histories
3: Payment History: Record of on-time and late payments
4: Credit Request: Number and sort of later credit checks
5: Public Records: Lawful activities like advance write-offs or settlements, if any
Understanding your report makes a difference when you spot blunders, settle mistakes, and arrange improvements.
Checking your credit report is fundamental for two reasons: following your credit-building advance and identifying mistakes or extortion. In India, you’re entitled to one free report per year from each bureau.
Here’s how you can audit your report effectively:
1: Look for off-base individual points of interest (spelling, address, Container mismatch)
2: Check if any credit or credit card is recorded that you never connected for
3: Review EMI history for blunders (e.g., an instalment stamped as missed that you made)
4: Identify copy accounts or obsolete entries
If you discover any issues, you can debate them with the particular bureau. Provide supporting archives, and the bureau will confirm the claim with the moneylender.
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Sometimes, indeed, safe propensities can harm your credit score. Here are practices to avoid:
1: Paying as it were the least sum due: This increments your intrigued burden and keeps your use high.
2: Closing ancient cards: Long-standing accounts offer assistance to protect your credit history.
3: Co-signing advances you don't control: If the essential borrower defaults, your score endures, too.
4: Maxing out cards frequently makes loan specialists think you're over-reliant on credit.
Being careful of these botches can secure your score as you work to construct or modify it.
Once you’ve built a solid credit profile, the benefits amplify distant past fair credit endorsements.
Here’s what a tall credit score (750 and over) can offer you:
1: Lower intrigued rates on domestic, individual, and vehicle loans
2: Faster and simpler credit card approvals
3: Better chances at premium rewards or travel cards
4: Higher endorsement chances for rental ascension or occupations in fund sectors
5: Access to pre-approved individual advances and EMI offers
A great credit score also gives you arranging control. If your credit profile is solid, loan specialists may be willing to forgo expenses or offer particular terms.
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If you’re fair beginning out and still uncertain approximately where to start, keep these tips in mind:
Start little: Utilize low-limit cards or little credits and construct gradually.
Avoid fast hacks: Do not drop plans that claim to immediately make strides in your score.
Keep documentation composed: Make beyond any doubt your Container, Aadhaar, and KYC reports are steady over all banks.
Stay upgraded: Utilize apps like Paytm, CRED, and BankBazaar to screen your score and get credit recommendations custom-made to your profile.
Taking after these hoes early lays the basis for deep-rooted monetary get-to.
While working to construct credit from scratch, isolating myths from actualities is similarly imperative. Misconceptions about how credit works can lead to awful choices. Here are a few common myths numerous Indians accept and the truth behind them:
Reality: You don't need to carry an adjustment and pay interest to build credit. Paying your charge in full each month is better for your score and your wallet.
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Reality: When you check your claim score, it's considered a delicate enquiry and has no effect. As it were, loan specialists performing complex enquiries influence your score.
Reality: Your wage is not a portion of your credit score. What matters is how capably you oversee your credit, not how much you earn.
Reality: Building a strong credit profile takes time. There are no shortcuts—responsible budgetary conduct over months and years is the way it was.
Reality: Indeed, one missed instalment can lower your score essentially and remain on your credit report for years.
Understanding the truth behind these misinterpretations can prevent poor credit choices and help you build a more solid financial foundation for the future.
Building a credit score is fair to begin with. The genuine challenge is keeping up and progressing over time. A solid credit score can open the entryway to way better budgetary items, but as it were if it's maintained. Here’s how to oversee your credit wellbeing long-term.
Timely payments remain the single most imperative factor in keeping your credit score high. Consider setting up auto-debit or instalment updates to guarantee you never miss a due date. One late payment can drop your score altogether, particularly if your credit history is short.
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While a 30% use rate is commonly suggested, going lower (beneath 20%) is perfect. This indicates that you aren't excessively dependent on credit, which consoles moneylenders about your monetary stability.
Requesting a constraint increment on your existing card (without expanding your investment) can help lower your usage proportion. It's a simple way to grant your credit score a slight boost.
Old accounts help protect your credit history, which emphatically impacts your score. Indeed, if you no longer utilize an ancient card, consider keeping it open with negligible movement and customary on-time payments.
A blend of secured (home/car credits) and unsecured (credit cards/personal advances) credit reflects well on your credit profile. It appears you can handle diverse shapes of credit responsibly.
Every time you apply for a credit card or credit, a difficult inquiry is made. Numerous of these in a brief period can also lower your score. As it were, they apply when vital and are particular almost to lenders.
Make it a propensity to check your credit report every few months. This makes a difference to you:
1: Catch blunders early
2: Detect false activity
3: Understand what’s influencing your score
Use trusted stages or the official websites of credit bureaus for free get to once a year. Following these propensities doesn't fairly protect your credit score—it makes a difference if it develops more grounded with time, giving you an edge in all monetary matters.
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Financial proficiency, particularly around credit, is frequently ignored in Indian instruction. Presenting credit concepts early—like how credit cards work, what a CIBIL score implies, and the long-term esteem of a great credit history—can prepare youthful adults for superior money-related choices. Schools and colleges can coordinate workshops or online resources to construct early mindfulness.
If you're wondering how to build credit from scratch in India, the reply lies in savvy choices and reliable propensities. Begin with apparatuses like secured credit cards or little, sensible advances to make your to begin with credit impression. Make it a run-the-show to reimburse all your levies on time, keep your credit usage moo, and utilize stages that offer assistance to track your score. Dodge quick-fix traps and remain absent from propensities that might reverse discharge, like applying for numerous credit products.
While it might appear moderate in the starting, tolerance and teaching will pay off. Over time, these endeavors build a credit history that opens the entryway to lower intrigued rates, quicker advance endorsements, and superior monetary openings. So whether you're arranging your to begin with car credit, domestic advance, or need to boost your work prospects, taking the time to build credit from scratch is one of the most intelligent budgetary moves you can make.
Usually, it takes 6 to 12 months of reliable credit movement to build a not-too-bad score (over 700).
Yes, understudies can begin with secured credit cards, understudy advances, or by getting an approved client on a family member's card.
Some BNPL suppliers report to credit bureaus. Continuously check some time recently utilizing, and reimburse on time to build your score.
While it shifts, a score over 750 is more often than not considered great for most sorts of loans.
Yes, through buyer advances, BNPL apps, utility charge announcing, and lease detailing services.
No, checking your possess score is a delicate inquiry and does not influence your credit.
Some loan specialists may favour small-ticket advances if you have work, a compensation account, or offer collateral like settled stores.
Defaulting on even a small advance can harm your credit score. It remains on your credit report for a long time and makes it harder to get endorsed for future credit.
They can, but as it were if detailed through third-party administrations like CRED or Experian RentBureau. Paying on time makes a difference and you construct a positive history gradually.
Not essentially. Taking numerous credits as well rapidly can harm your score due to numerous difficult enquiries and tall obligations. Center on convenient reimbursements and moo usage instep.
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