Often credit cards are touted as a great convenience and also a great way to build credit for someone who is new to credit and has no credit history. However, there is a flip side to using these cards, there is tendency to overuse them and one can easily become debt ridden due to this. Not paying on time or using the card more than your repaying capacity could cause huge dues to pile up due to the exorbitant interest rates and fines which can result in one falling in a debt trap. Apart from convenience using cards also has another advantage it allows one to generate credit history without the burden of loans. So what to do if one hates credit cards but still wants to build credit and not rely on long term debt; we have a few ideas.
Getting a credit card issued against a deposit is often considered as simple and safe way to generate credit history. Unlike normal cards where the credit limit is linked to the income, for these cards the credit limit is linked to the deposit amount. The limit would be 70%-80% of the deposit amount so you could choose to get a card issued against a deposit of a small amount. Here the risk of overspending is reduced as the sanctioned limit is already small (due to the small amount of the collateral deposit) and there is no provision of overshooting your limit. This card does not require the applicant to have a credit rating. Using this card will keep your spending in check while giving you an opportunity to have a credit trail.
As we said credit cards can led to a debt trap, yet they offer a simple and effective way for credit history creation without one relying on long term debt. So, there is a way you can use your cards without being overly dependent on them and yet have a credit trail. Get a card issued and use it every month for making the essential and regular monthly expenses. This could be things like paying your utility bills (electricity, phone, water) etc. This will ensure that you do not use your card for non-essential things that may be categorized as wasteful expenditure or splurging. However the important aspect here is to pay the dues on time so that you create a good history which can result in a good rating.
One may want to avoid long term debt especially until one is financially stable or unless one has an absolute necessity for it. However often in current times, education loans come to the rescue when one is seeking to get higher education and these are loans that can hardly be termed as non-essential. These are loans that are available on fairly easy terms and may be available on the guarantee of a guardian or on the basis of securing admission to a good institute. These loans are fairly common and often are the first loans of an individual, so if one already has an education loan then paying the dues on time and regularly will ensure that the borrower creates a good credit history without the help of both long term debt and credit cards.
If need arises getting a personal loan without CIBIL score or for that matter any other loan like a home or an auto loan could be challenging. Thus a good credit rating can help one in securing credit. No credit history and poor credit history are both impediments in securing credit.
Your email address will not be published. Required fields are marked *
Nice Article. There is always pros and cons of every aspect. Indian Cu ...
Thanks for finally writing about >Why Indian women fall short on cr ...
Thank you for sharing your infօ. I reɑlly appreciate yⲟur efforts and ...
Daily Tips to stay Credit Healthy
© All Rights Reserved at Credit Sudhaar