Curated By: Business Desk
Last Updated: September 13, 2023, 18:42 IST
In India, a credit score is a prediction of the credit behaviour of the consumer which shows how likely they are to pay back the loan that has been taken on time. It is basically a numerical report that helps in understanding the behaviour of the consumer’s credit repayment. It is quite important to have a good credit score in order to get a loan sanctioned by a bank.
A good credit score means that it will be easier for a person to get a new loan. One of the most popular ways to build a credit score is to buy things on a credit card and repay them. But it is not the only way to build a credit score. So, let’s look at some other ways to build a good credit score:
Become an Authorised User
One of the most popular ways to have a high credit score without a credit card is by becoming an authorised user. This allows the person who has become the authorised user to take advantage of the timely loan repayment or credit card bill payment made by the person. This helps in creating a good credit score. But if the person fails to repay the credit on time, this would also reflect on the credit score of the authorised user.
Taking Small Loans
Another way to create a good credit score is by taking small loans from the bank. Small loans do not require a credit score and are easily sanctioned by the banks. They are easy to repay and also reflect on the credit score of the person.
Reporting of Rental Payments to the Banks
One can share the receipts for rent payments with their credit card companies. Paying rent also plays an important role in building up the credit score. If the rent receipts are submitted to the credit bureau, they will appear on the credit report.
If a person is unable to get a loan from a bank, they can take loans from online platforms. This process is called a peer-to-peer loan. Even though their interest rates are much higher than normal loans, they are sanctioned without a credit history and even with a slow credit score. One can improve or build their credit score by taking a small loan from there.