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 Simple steps to build a credible credit history

Simple steps to build a credible credit history

No matter how much information is out there, most of us are still in the dark when it comes to money matters. The reason is not that we don’t understand it, but that we chose to look past it – ignore it because talking about financial concerns never leaves a comfortable air behind.

However, there comes a time when each of us are faced with several important financial decisions in life, and need to turn to a financial institution for support. But, not everyone who wants a loan, gets a loan since the final decision purely lies with the bank. What we could ensure however, is to keep a check on our finances and be loan eligible.

The first step towards being an ideal borrower would be to have a good credit history.
What does credit history mean?

Well, it simply means your credit transactions in the past. Every personal loan or credit card you have availed, will be reported by the institution to the Credit Information Bureau in our country. This information is updated periodically and serves as a ready reckoner for banks whenever they place a request for your credit information report. This report will contain a detailed summary of all your past credit transactions, the number of times you have applied for a loan and also whether you have been regular in paying your emis or not.

Why is it important?

Naturally, with a credit history it is easier for institutions to assess whether you will be prompt in paying your dues or not. If you have had any late payments or check bounces while paying your dues, this will also be recorded in your report. If you have had any bounces in the recent 6 months prior to your applying loan – you will not be granted one at all!

A prompt payment record devoid of any bounces or late payments should translate into a high credit score which will  definitely help improve your chances of getting a loan


When would be a right time to start?

Well, more than often we tend to find out that we need to build a credit history after our application has been rejected. (There are very few banks that will lend to first time borrowers)

So, it is always advisable to start building on a credible history to look back at, so that when you do apply for a loan, most of the process tends to become a lot easier.

How to go ahead with building a credit history?

Well, the earlier you start, the better it is for you. If its been more than a year since you have started earning, this would be an ideal time to start building your credit history. Start off by purchasing a basic credit card and use it a couple of times every month. The more frequently you use, clearer will be the report generated. However, the more important aspect would be to be sure of paying your credit card bills on time, this will boost your credit score.

Or if you aren’t too sure of paying your bills on time, get a credit card against your fixed deposit account. This is a type of secured credit card wherein even if you are unable to pay your dues, the money will be deducted directly from your FD account.

Remember, a credit score can mean a lot more than just a loan approval, in fact a lot of significance is being given in other spheres such as the employment sector.


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Priya Rai is a loan consultant.