No credit card? no problem! 5 smart ways to establish your credit score

In India, there is much emphasis on maintaining a good credit score to obtain loans and credit cards. However, it's challenging for many people to build their credit history if they don't possess a credit card.

The best part for all such cases is that there are a number of effective means through which you can establish a good credit score without credit cards. On a fundamental level it is important to maintain a healthy credit utilisation ratio. Here are 5 easy ways through which you can establish a credit profile and a good credit score without a credit card:

Taking small loans

The easiest way of possessing a credit score even without a credit card is to take a small loan from a bank or a Non-Banking Financial Company (NBFC).

Bajaj Finance for example provides for small loans ranging from 10% to 31% interest rates. The interest rates in this case depend on factors such as: your credit score, monthly income, employment etc.

Now repayment of such loans within time demonstrates sound money management, which boosts your credit score. This is an effective way as lenders closely check your credit history and repayment consistency before offering you a loan.

Consistent utility bill payments and reporting

Timely payment of rent and utility bills puts your credit score in the right direction. It defends you from having a low credit score. Utility bills do not normally go to the credit bureaus but you can take advantage of rental reporting websites in order to be rewarded for timely rental payments. These websites verify your rental payment and report it to the credit bureaus, thus creating a good credit report.

This proves to be useful even in the instance of a strict check or a hard inquiry of your credit history. It is thus essential to possess a good financial reputation over the long term.

Utilising a secured credit card or secured loan

If you are not going to get an unsecured credit card, you can have recourse to a secured loan or secured credit card guaranteed by a fixed deposit or savings.

Payment of a secured loan or credit card on time does leave a good payment track record, which contributes to your credit score over time. Lastly, it is your habit of consistent repayment which the lenders are looking for. How open, honest and fair are you in loan repayments and how consistent you have been over the years? That’s the question.

Peer-to-peer lending and authorised user status

Another option to establish credit with alternative financial products is peer-to-peer lending. Taking a loan from P2P sites and paying it back on time proves that you can handle debt. Further, becoming an authorised user on such platforms, with a clean credit repayment history, will help you establish credit integrity by riding on your good re-payment record.

Having stable and consistent employment history

A stable job is also a requirement in building a good credit history. History and duration of employment are also taken into consideration by lenders when they make decisions about the creditworthiness of a person since it reflects one's stability in finances, maturity as a person and capability to repay debts.

Therefore, by following these simple steps you can look to establish your credit score successfully without necessarily having to turn to credit cards, opening the door for improved future financial prospects.

Disclaimer: This article is for informational purposes only and does not constitute financial advice.