5 Tips for Young Individuals to Build a Strong Credit Score Early
Bangalore, September 2024: Building a strong credit score early in life is crucial for financial stability and accessing better opportunities in the future. Jagdeep Mallareddy, Chief Business Officer (CBO) at Piramal Finance, emphasizes, “Starting with a secured loan or a low-limit credit card is an effective way to begin building credit. For instance, a secured loan might require a fixed deposit of ₹10,000 as collateral. Using the loan or card responsibly by making timely payments helps establish a solid credit history without accumulating unmanageable debt.”
Consistently paying your bills on time, including loan payments, utilities, and rent, is one of the most critical factors in building a strong credit score. Setting up reminders or automatic payments ensures you never miss a due date, as late payments can significantly affect your score.
“Another key point is keeping your credit utilization low. Aim to use less than 30% of your total credit limit. For example, if your credit limit is ₹50,000, keeping your balance below ₹15,000 shows lenders that you manage your credit responsibly,” advises Jagdeep.
Monitoring your credit report is also essential. Regularly checking your credit report helps you verify the accuracy of the information and detect any potential errors or signs of identity theft. You’re entitled to one free credit report annually from each of the major credit bureaus, which allows you to address any issues promptly.
Finally, be cautious with new credit applications. “While having some credit accounts is beneficial, applying for too many in a short period can negatively impact your credit score due to hard inquiries,” Jagdeep warns. Instead, focus on managing a few credit accounts responsibly.
Building a strong credit score takes time and discipline. By following these tips, young individuals can position themselves for financial success. Responsible credit management opens doors to better interest rates, higher credit limits, and more favorable terms on financial products. Start early, stay diligent, and you’ll enjoy the long-term benefits of a robust credit score.
