I’m considering applying for my first credit card, but when I try to check my credit score, it shows that the score is not available or hasn’t been generated yet. I understand that a credit score is important for loan or credit card approval, so I’m a bit confused. Why is my credit score not showing up?
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Your credit score is not generating because you never had a credit card/loan before. If you’ve never used credit (e.g., never had a credit card or loan), you won’t have a credit score because there’s no financial history to assess.
While a credit score is important for getting approved for a credit card or loan, especially at better interest rates or with higher credit limits, you can still apply for a credit card even without a credit history. To start building your credit score, consider these credit cards-
Credit Card against Fixed Deposits (FD’s)-
Bank offers Credit Cards against Fixed Deposits (FDs), making it easier for individuals to access credit without a strong credit history. The credit limit is usually up to 85%-90% of the FD amount.
Add on Cards-
An HDFC Bank Add-on Credit Card is a secondary Credit Card issued to HDFC Bank Credit Card holders. It allows primary cardholders to extend the benefits of their Credit Card to their spouse, children, or parents. The credit limit on the Add on Card can be the same as the primary card’s limit; however, the primary cardholder has the flexibility to set a lower limit based on their preference.
Once you get a credit card, remember these things-
1.) Pay your bills on time:
Paying your bills on time is crucial, as it helps improve your credit score and protects you from incurring late payment fees.
2.) Maintain Credit Utilization:
The credit utilization ratio is the percentage of your total available credit that you’re currently using. Maintaining your credit utilization score below 30% will help you in increasing your credit score.
3.) Not apply for too many credit cards:
Applying for multiple credit cards can lead to hard inquiries on your credit report, even if some of these applications get rejected.
4.) Maintain a healthy mix of credits:
It is better to have a right combination of secured loans (such as Home Loan, Auto Loan) and unsecured loans (such as Personal Loan, Credit Cards) of a long and short tenor to build a good credit score. Too many unsecured loans may be viewed negatively.
I don’t have a credit score since I’ve never taken a loan or used a credit card before. I’ve read that options like credit cards against Fixed Deposits or add-on cards from a family member can help start building credit. In this case, what’s the smarter way to begin building a credit history in India?