No credit profile? Here is what you can do to have a robust score

Build your credit profile by applying for a secured credit card backed by a FD to build your credit profile

In today's financial landscape, having a robust credit profile is crucial for securing loans, credit cards. However, for many individuals, the challenge begins with the absence of a credit history altogether. This situation is common among new-to-credit individuals, those who have never borrowed money. If your credit profile does not exist, here's what you can do to start building it.

 

“If your credit profile does not exist, it means you do not have a credit history recorded with any of the four credit bureaus. This can happen if you have never taken a loan or used a credit card. Without a credit history, lenders may be hesitant to approve loans or credit applications since they have no past records to assess your repayment behaviour. However, there are several steps you can take to build your credit profile and establish a strong credit score,” said Adhil Shetty, CEO of Bankbazaar.com.

 

 

Few useful steps

 

Start with a secured credit card: One of the easiest ways to start building credit is by applying for a secured credit card. This type of credit card is issued against a fixed deposit (FD). By using this card for small expenses and repaying the bill on time, you can begin generating a credit history.

 

Apply for a small loan from a bank or NBFC: Another effective way to build credit is through small loans. Some fintech lenders and NBFCs (Non-Banking Financial Companies) provide personal loans to first-time borrowers.

 

Use 'buy now pay later' (BNPL) services responsibly: Many fintech platforms offer BNPL options that report to credit bureaus. Using these services and making timely payments can help build credit.

 

Check your credit report regularly: Once you begin building credit, monitor your credit report to ensure all information is accurate and to track your progress.

 

Be patient and consistent: Building credit takes time. Focus on making all payments on time and managing your finances responsibly.

 

If you need a loan, applying with a co-applicant or guarantor who has a good credit score can improve your chances of approval. The loan repayment history will be recorded in your name, contributing to your credit profile.

 

“Apart from loans and credit cards, maintaining a healthy bank account with regular transactions, steady income deposits, and responsible financial behaviour can also help when applying for credit in the future. Lenders often check an applicant’s banking history when evaluating loan applications. If you make repayments on time, you can build a strong credit history and improve your financial records,” Shetty said.  “Having a good credit utilization ratio, below 30 per cent, is also vital for a good credit score. If you can, take a pre-approved loan, as it makes the process easier and helps you establish credit when paid conscientiously. Keep in mind that building credit is a slow process that requires patience, but with regular effort, you can build a strong foundation for your financial future,” said Rajesh Katoch, CEO, EZ Capital.

 

Challenges and considerations

 

Delays in reporting: New accounts may not appear on your credit report immediately. It can take several months for the information to be updated.

 

Non-reporting issuers: Some credit card issuers may not report to all credit bureaus, which can limit the impact on your credit score. Always verify the issuer's reporting policy before applying.

 

Identification errors: Ensure that your personal details are accurate when applying for credit products to avoid issues.