I have often wondered and I am sure other also feel the same, that credit history and loans are like the egg and the chicken dilemma, what came first. Getting a loan or credit card without credit history is not possible and creating credit history without a loan or credit card is also not possible. So what does one do if they have no credit history? How do they create a credit trail if they are not able to get a loan or card due to lack of credit rating?
No credit is not a good thing anymore; unlike in old days when being credit free was a matter of pride. However if you have no credit history then it does not mean that you have a bad credit score. If a lender seeks your CIR in such a scenario your score will show as NH (No History). So what does it mean for you have no credit rating?
Getting a loan without a credit score could be challenge if not entirely impossible. Lenders usually reject a loan application right at the initial stage if the credit score is low or there is no credit history available for the applicant. There might be lenders who might be willing to offer personal loans without CIBIL check or an auto loan even if you have no credit score. However these loans may be available at higher rates (when compared to the prevalent market rate) or they may be sanctioned after extra security checks or may required additional eligibility criteria to be fulfilled by the applicant.
So if you have no credit trail do not be dismayed, starting afresh gives you the option of doing it the right way. You are not burdened with your oversights from the past, there are no mistakes that need taking care of and no poor credit behavior haunts you. So here are a few things that you can do to start a fresh credit trail:
This is one of the simplest ways to start a credit trail. Almost everyone in current times has a bank account and fixed deposits are a favorite investment choice with most Indians. A deposit that you hold with a bank can come to your aid in such a scenario. A lot of banks offer credit cards against deposits held at their branches. When offering such cards, no credit check is required so getting these credit cards even without a credit score is possible. These cards work like normal cards and the credit limit is fixed at 70-80% of the deposit amount. So the user can use it like a normal card, pay the bills on time and this will help him get a credit trail.
Most organizations have tie-ups with banks for salary credits and also for providing various financial services and products. If you are employed in the corporate sector then starting a credit trail for you might a little simpler. The bank or the FI with which your company has a tie-up will be willing to offer you a loan or a credit card even without a credit history because of the special arrangement they share with the corporate. Credit checks help the lender establish the creditworthiness of the applicant, being employed with a corporate (with which the bank has a tie-up) gives them more confidence about the applicant as they are sure about his/her employability.
Nobody would take a loan just to establish a credit trail; this makes credit cards more useful when somebody is trying to get a credit rating. In current times a healthy credit score can help you not only in getting a loan but also in certain cases may be mandatory for getting a job.