How to Start Building a Credit Score?

A credit score is a measure of an individual’s ability to pay back the borrowed amount. It is the numerical representation of their creditworthiness. A credit score is a 3 digit number that falls in the range of 300-900, 900 being the highest. You should always work towards reaching a credit score that is close to 900. A higher credit score offers you several benefits and helps you at the time of getting a loan or a credit card. Generally, lenders like banks and non-banking finance companies consider consumers with a credit score of 750 and above. Having a low credit score suggests you have not been a responsible borrower and have been slacking off repaying the borrowed sum. Credit scores are calculated by the credit bureaus in the country after taking into consideration several factors like the length of your credit history, repayment records, credit inquiries, among others. If you have a higher credit score, you are entitled to receive preferential pricing and get discounts on the interest rate. Moreover, a high credit score gives you the additional power to negotiate for better rates of interest on loans. 
Here are some of:
1. Apply for a secured credit card:

If you are not able to get an approval for your credit card application, you can opt for a secured credit card. A secured credit card is easy to get and requires less enquiry as it is issued against some security such as fixed deposits with banks. On the other hand, a credit card is an unsecured type of loan. A secured credit card holder can increase the credit limit and also earn interest on the FD account. It works just like an unsecured credit card after the initial deposit is being made. Similar to a regular credit card, all transactions are reported to the credit bureaus and used for calculating your credit score when you use a secured credit card. Although a secured credit card does not come with an annual fee, you should learn about the other fees that are associated with the card. Other fees can be late fees, returned payment fees and so on.
   
2. Credit card against savings account:

You can also get a credit card against your savings account as some of the major banks offer this facility. You will have to deposit a certain amount of money in the account for the bank to provide you with a credit card.
 
3. Get a credit card with a smaller limit:

You can approach a trusted bank and apply for a basic credit card that has a low limit. It would be better if you apply for a credit card at the bank that already has a saving account. Since the bank already has your details, there is a higher probability that they will be willing to offer you a credit card. Once you get the credit card, make sure to keep a low credit exposure and try to use only 10-30% of your credit score. Also, you need to pay your credit card bill on time and avoid late payment as it will affect your credit score.  

4. Open a joint account: 

This is one of the easiest ways to start building your credit. You can open a joint account with a family member who has a well-established credit history. As joint account holders, the account will appear on both of your credit reports and impact both of your credit scores. 
 
5. Maintain a low credit utilisation ratio:

An ideal credit utilisation ratio essentially means that the utilization amount should be lower than the credit limit of your credit card. According to experts, you should avoid using more than 30%-40% of your credit card limit. Having a high credit exposure suggests, you are credit hungry and creditors will not let offer you money. 

6. Become an authorized user on another credit card: You can even ask a close friend or family member to add you as an authorized user to an account they already have. One of the benefits of being an authorized user is that you can make purchases on the card, but you won’t be responsible for repaying any debt.
 
7. Avoid hard credit checks: 

Each of the credit application/requests will attract a hard credit report check by the bank. Therefore, when you apply for a loan or a credit card and the application get rejected, it is advisable not to re-apply instantly. Also, don’t make multiple credit requests at the same time as it will trigger too many credit inquiries. 

8. Take a personal loan:

If you don’t want to get a credit card in the first go, you can opt for a personal loan. For starters, you can apply for a personal loan with your bank for a vacation or some other plan. 
 
At the end, you must remember that you have to start somewhere to build your credit history. At the same time, take a loan only if you are sure you have the ability to repay it. It must be noted that you need a lot of patience and discipline to build and improve your credit score as it is a slow process and will not give you results overnight. All the best!