As you start your journey toward accomplishing various financial goals, you realize the importance of building a credit score. Although it is simply a three-digit number, it represents your creditworthiness. Besides this, your credit score is the first thing that lenders check before processing your loan application. From borrowing a home loan to applying for a car loan, a good credit score is needed everywhere and is super helpful in achieving different milestones in life.
However, if you have never borrowed any form of a loan or do not use a credit card, then you probably do not have any credit history. Being a new-to-credit user, you should know that you won’t be given a good credit score right off the bat, nor can you build it overnight.
This takes us to the question you might want to ask –
How Can you Start your Credit Journey and Attain a Good Credit Score?
Well, there are several ways to build a good credit score, including the following:
1. Apply for Paytm Postpaid online
A great way for Indians to start building their credit score is to sign up for Paytm Postpaid – a Buy Now Pay Later (BNPL) financing option offered by Paytm and backed by various lending partners. One of the reasons you should apply for Paytm Postpaid is that it does not necessarily require you to have a credit history. For new-to-credit users, the Paytm Postpaid may be less than that of users having a credit score. Some of the Paytm Postpaid benefits include:
- Instant spend credit of up to Rs. 60,000
- 100% digital process and no activation fee
- Paytm Postpaid use-cases encompassing 1.5 cr+ shops across the country
- Nominal convenience fee levied as Paytm Postpaid charges
2. Borrow a short-term loan and repay it on time
Another way to start building your credit score is to apply for a small short-term personal loan from an authorized bank or NBFC (Non-Banking Financial Corporation). You can use the amount for your regular expenses or fulfilling any financial goal and then continue to repay the borrowed amount with interest over the selected repayment period.
The spread of loan repayment over the chosen tenure will help you build your credit score over time. If the need arises, you can also apply for a bigger loan after repaying the current one.
You can also apply for an instant personal loan with Paytm. To know more, click here.
3. Monitor the extent to which you utilize available credit facility
Irrespective of the channel you have selected to borrow a loan (Paytm Postpaid or any other), you should also know that the credit bureaus also consider the credit utilization ratio to determine your creditworthiness. This is also known as the balance-to-limit ratio and is an indicator of the extent to which you avail of the credit facility.
If you do not want to leave the impression of being a credit-hungry consumer, it is important to monitor your credit spending carefully. In some cases, excess utilization of available credit may negatively impact your credit score.
4. Pay your credit dues on time
Your initial credit repayment history plays a crucial role in determining your credit score. That’s why it is advisable to build the habit of making on-time repayments. In case you are using Paytm Postpaid, paying off your bill in full every month will restore the total credit limit and make it available for use again.
You can also benefit from automatic bill payments to avoid forgetting a payment and keep on improving your credit score.
5. Check your credit report regularly
A full-fledged credit report, which replicates your financial health and also includes your current credit score, can provide you with detailed information about your credit spending and borrowing habits. You can benefit from fetching this report regularly and analyzing how your borrowings have impacted your credit score. Accordingly, you can change your spending habits and improve your financial health.
When you begin your credit journey, it can feel like there is a long way to go to build a good credit score. All you need to do is to be consistent with the timely repayment of the borrowed amount and watch your repayment habit pay off.
Check your credit score for free here.
Disclaimer: Paytm does not provide any loans but has partnered with NBFCs to make its users avail this facility.