No credit card? Here’s how you can still build a great credit score

The credit landscape in the country is rapidly evolving as technology advances in credit distribution across banks and NBFCs. This makes it critical for aspiring borrowers to maintain a clean credit profile and a solid credit score.

Now, if you don’t currently have a credit card, with the right steps, you can still build a reliable credit profile, which is useful when you later apply for new personal loans, home loans, credit cards, and mortgages. Proper planning is the key to accomplishing this goal.

Start small and on time

1. Apply for and secure a small personal loan or a secured loan, i.e., a fixed deposit-backed loan from a reputable bank or NBFC. Then, repay it as per the timelines without missing any due dates.
2. Utilise the EMI plan offers provided by e-commerce platforms for purchasing products and services. You can also try the Buy Now Pay Later (BNPL) option and ensure that you make repayments on time. This will help you establish a clean credit history and a strong credit profile.
3. You should also ensure that your utility bills, rent, and subscriptions are cleared punctually without fail. Imbibing healthy credit management practices will help you sustain a high credit score for years to come.
4. On a fundamental level, the goal must be to showcase effective and responsible credit management and repayment over longer periods of time. This must be achieved by making timely repayments of credit card bills, personal loan EMIs, and home loan EMIs.
5. In case you miss out on any personal loan EMI repayments, your credit score is going to suffer. Defaults can stay on your profile for years and make securing future personal loans and credit cards challenging.

Build consistency and discipline

• Maintain a predictable income and steady employment. A stable job will signal predictability in monthly cash flows, and it showcases solid repayment ability to lending institutions.
• Do make sure that you never apply for several different personal loans, credit cards, or home loans simultaneously. Every single credit or debt application can trigger a ‘hard inquiry’ on your credit profile. This can negatively impact your credit score and be perceived as credit-hungry by lending institutions.
• Leading credit bureaus, such as CRIF High Mark, CIBIL, Equifax, and Experian, provide credit reports. Customers are entitled to one free credit report on an annual basis, as per the directions of the regulator.
• As a responsible borrower, you should regularly monitor and review your credit report for errors, mistakes, or incorrect entries. If you find mistakes, try to resolve them quickly to protect your credit score from deterioration.

Why does this work, and when will you see results?

Credit bureaus track repayment behaviour even without a credit card. A consistent repayment record helps build your credit score over time. Do keep in mind that improvements in credit scores are not instant. They generally appear gradually over a period of six to twelve months of responsible debt repayment.

In conclusion, making consistent repayments, practising smart borrowing, and utilising alternative credit channels responsibly can help build a strong credit score, that too without relying on a credit card.

For all personal finance updates, visit here.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with risks such as high interest rates and hidden charges. We advise investors to discuss with certified experts before taking any credit.