No credit score? Do not panic!

10-Oct-2016 written by : FSI-Team

Some of us have been in a situation where we have applied for a credit card as a fresh jobber, but found out much to our surprise that the application has been rejected. Sounds familiar? If the reason for decline is the lack of credit history, do not be too surprised. And instead of hitting the panic button let us see what you can do to remedy the situation.

While most people believe that having a low or bad score is the only reason an application for a loan or credit card gets declined, the same is not always true. A lender looks at your credit report (and the credit score thereof) to gauge the borrower’s creditworthiness, which in turn is derived from previous credit history, among other contributing factors. Hen1ce having no history will also have an impact on your credit score and eventual loan application, because the lender has no information to go on, to begin with! Yes, it can often be a Catch-22 situation, but there is a resolution at hand.

What we will understand further is what to do when you do not have a credit history (and therefore a credit score) and how to build it from scratch. What becomes tricky is – ad is the question most people have to ask – how do you build a solid credit history when no one is willing to extend credit to you, to begin with?

Secured credit card – This is one of the sure shot ways to start building your credit score, because it is a secured product that your bank will likely be willing to offer you, even if you have no credit history to speak of. How the card works is simple, it is backed up by a fixed deposit, which the bank can draw on to recover due if the card owner does not pay. Of course, when you want to build a history that is not an option, so make timely and regular payments towards loan outstanding, and build your credit enough to be able to eventually close this card and opt for a ‘regular’ card instead.

Get a co-applicant – You could also apply for a loan, for instance wherein you have a person with a good credit score as your co-applicant. This would get you the credit you require, plus eventually help establish your credit score. Of course, do remind the person co-signing that they too are liable in case of non-payment of dues! While there is available loan for low CIBIL defaulters, someone who has been considerate enough to back you up would not want to fall into that trap! Also, repaying in a timely manner will help you build your score as desired.

Become an authorised user – If someone you know (typically a close family member) is using a credit card that allows you to become an authorised user on it, do so. What this does is, give you a card in your name that you can use to make purchases, while the information will not reflect on your credit report as it will not count as an open line of credit. Hence while becoming an authorised user does not make you accountable financially for the card, it still helps to build credit.

Become a joint account holder – This is likely something only close family or a friend would agree to do, that is add you as joint holder to their credit card account. With this, you will in a way ‘inherit’ the card’s history, so do remember that a maxed out card limit or a payment default on the card holder’s part will reflect on your CIBIL score. Hence make sure you choose the person wisely, and take due care to not feature on a CIBIL defaulter list, which is nothing but a list that every lender or credit card issuer maintains in order to block a defaulter from entering their system a second time.

Pre-approved loans – A product that your bank may provide, basis your banking relationship (and possibly history) with them, a pre-approved loan is one of the quicker ways to get yourself credit in order to start building credit history from scratch. These might just come with a higher rate of interest, or may not necessarily be for a significant amount, but they are a good place to begin. As with any other loan remember to service this loan well, because it can well be the building block to your financial future.

In conclusion

Hence, while it is not impossible to get credit even without a credit score, you should always use credit judiciously. As a first time borrower it is even more critical to ensure that your credit habits are exemplary from the word go, to ensure yourself a financially fit future.



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