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Credit Score: Effective ways to improve credit score without credit card
17 October, 2024 | 11:01 IST

Your credit score is a vital number that reflects your creditworthiness. It is a major factor for the approval of loans and new credit card applications. Maintaining a good credit score needs financial discipline and responsible management of credit instruments. Managing credit cards effectively helps in improving your credit score, but there are several other ways to maintain a healthy credit report.

There are various effective strategies you can adopt to enhance your credit score even without having a credit card.

Table of Contents

Understanding credit scores and reports
Improving credit score without credit card: Easy tips to follow
Conclusion
Summary

Understanding credit scores and reports

Before we delve into improving your credit score without a credit card, it’s essential to understand what a credit score is and how it functions. A credit score is a three-digit number that summarises your credit history and indicates your creditworthiness. Typically ranging from 300 to 900, this score is calculated based on various factors, including your payment history, credit utilisation, length of credit history, types of credit used and recent credit inquiries.

Your credit report, generated by credit bureaus, is a detailed account of your credit activity and is used to compute your credit score. Lenders rely on this score to gauge the risk associated with lending money to you. You can check your credit score and the detailed credit report for free on digital platforms like the Moneycontrol app and website.

ALSO READ: What Affects Your Credit Score & How To Build a Healthy Credit Score

Improving credit score without credit card: Easy tips to follow

Improving your credit score without a credit card is not only possible but can also be straightforward. Understanding your credit health is the first step to tracking and enhancing your score.

Here are ways to help you improve your credit score without a credit card:

Availing a loan from a bank or an NBFC: Banks and Non-Banking Financial Companies (NBFCs) report your loan payments to credit bureaus, similar to credit card payments. Securing a small loan, even without a credit card, can help establish a positive credit history. To apply for the loan, you’ll need to provide your income proof, identity and address proof, and a guarantor, if required. As you make timely repayments, your credit score will reflect your responsible management of debt, improving your overall creditworthiness. Apart from this, successfully managing a small loan can open doors to more significant financial products in the future like auto loans, home loans and education loans. Availing any such loan and making the payments without any default will be helpful in building a strong credit report. These types of loans offer a healthy credit mix aiding the credit score.

Getting a secured credit card: In case you are unable to apply for a regular credit card, a secured credit card could be helpful in improving your credit score. A secured credit card is issued against a cash deposit or any other asset pledged as collateral. Many banks and NBFCs issue such credit cards. The credit limit for a secured credit card is decided as per the cash deposits or value of the assets pledged. The card issuers can approve a credit limit equivalent to the value of the security. Such cards are generally beneficial for those with low credit scores or a suitable credit history.
Consider a peer-to-peer lending loan: Peer-to-peer (P2P) lending has become an effective alternative for those seeking to establish credit without relying on traditional methods. By using online platforms, you can borrow money directly from individuals instead of financial institutions. P2P loans offer several advantages, including shorter repayment terms and competitive interest rates compared to credit cards, making them a convenient option for building your credit history. This lending approach can be particularly beneficial if you find it challenging to secure a credit card.

Conclusion

Improving your credit score without a credit card may seem tough, but it is achievable with the right strategies. It’s important to regularly check your credit report through online platforms like the Moneycontrol app, where you can monitor your progress and stay informed about your credit health. Also, don’t miss any due EMIs for loans or credit lines. This will help you maintain a healthy credit score even without owning a credit card. A disciplined approach towards debt repayment, responsible use of credit facilities and a regular review of credit score could be significant in improving credit score even if you don’t own a credit card.

Summary

By availing small loans, getting a secured credit card or even exploring peer-to-peer loans you can build a strong credit history and boost your creditworthiness.

Disclaimer

This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.

About the Author

Fintech

Stay updated on the latest personal finance trends, with a focus on products like credit cards, credit score, personal loans, fixed deposits, and more

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