You’ve probably heard the expression, ‘to get credit, you need to have credit,’ which may be very frustrating for a credit beginner.  

Most major life events, such as purchasing a home or leasing a car, necessitate credit history; yet, if your credit score is low (or nonexistent), you will likely be denied or face higher interest rates. The majority of credit cards also require some form of credit history to qualify, with only a few cards designed specifically for persons with no credit.  

Even if you’re just starting out, there are ways to build credit. 

What is a Credit Score History? 

Your credit score history, often known as your credit report, is a document that contains information about your financial conduct. It indicates if you pay your bills on time, how much debt you have, how many times you have asked for credit, and if you have ever missed a payment. Your credit report will go far further into your loan history, allowing lenders or financial institutions to examine how you have handled any funds that you have borrowed. If you have a history of late payments, the report will reflect this, raising red flags with lenders. This is why a good credit history is so important. 

How to Build a Credit Score History from zero? 

When you are just beginning to construct your credit history, it may be tough to establish credit. If you don’t have a credit history, it’s tough to get a loan or even a credit card. But how would you demonstrate a track record of regular repayments if no one will lend you money to begin with?  

Here are a few pointers to help you get started with developing your credit score history from scratch: 

Apply for a Secured Credit Card 

A secured credit card is issued in exchange for a fixed deposit. Nonetheless, it has all of the characteristics and benefits of a credit card and assists you in building credit. These credit cards are simple to obtain because they are based on your bank’s fixed deposit. This is an excellent method to begin building your credit.   

Because your information is frequently submitted to credit bureaus, secured credit cards will eventually help you build credit faster. Several credit card companies provide you information regarding your credit card balance and payment every month. As a result, if you make one or two purchases per month and then pay them off, your credit history will reflect it.  

Become an Authorized User 

Using an unsecured credit card is yet another strategy to improve your credit score. As previously stated, those with no credit history are unable to obtain an unsecured credit card. They can, however, improve their credit score by becoming an authorised user on someone else’s credit card. If your spouse or another family member is using a credit card, you can ask them to make you an authorised user on the card. Because you are new to credit, you must exercise extreme caution when using it, especially if you are an authorised user, as a single blunder will have a direct influence on the credit score of the person whose credit card you are using. 

Ensure Timely and Complete Payment of Your EMIs 

Ensure timely and complete EMI payments to safeguard your credit score. A single instance of a late or missed loan or credit card payment can significantly harm your credit standing. Utilize automatic direct debits to guarantee on-time payment for all your bills. Your payment history stands as one of the most critical factors affecting your credit score. Create a notification system to remind you of upcoming payment due dates and make sure to meet, at the very least, the minimum payment on time. It’s crucial to consistently meet all your EMI obligations punctually. 

Make On-Time Payments Every Month 

PAY ON TIME! is the golden rule for everyone establishing a credit history and credit score. This is by far the most essential factor in determining your credit score. If your payments are 90-180 days late, your account may be turned over to a collection agency, which will harm your credit score for seven years. On-time payment is an excellent personal and financial habit. 

Monitor Credit Utilization Ratio 

Your credit card has a credit limit (the maximum amount that credit card companies will allow you to spend). Credit bureaus use the credit utilisation ratio to determine your credit score when you first use a credit card. It is the proportion of your credit limit to the amount you have spent on a credit card. It is also known as the balance-to-limit ratio. 

Monitoring this ratio is critical since it demonstrates how well you handle the credit you have available to you. If you don’t want to appear credit-hungry, keep your credit utilisation ratio between 30% and 40% of your overall credit limit. Even while a CUR of 60-70% has absolutely little effect on your score, frequently maxing out your card or having a CUR of 90-100% on a regular basis depicts you as a credit hungry person and may have a negative impact on your score. 

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