How to Get a Loan Without Credit History?

Non-Performing Assets have hit the financial institutions as well as the economy hard. Thus, RBI is taking stringent measures to tackle the problem, one of which is the increased emphasis on credit checks.

Although getting a loan without a credit history is difficult even today, shortly it’s going to be harder. But, here lies the problem- you need experience with a loan to create a credit history, but you need a credit history to get a loan in the first place. Thus, it’s a classic catch-22 situation. So, what can you do?

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Building a Credit History

No bank trusts a candidate who has no credit history because it makes it difficult for them to assess their creditworthiness. However, we all need to start somewhere. In your case, getting a credit card is the best option.

Unlike loans, credit cards are easy to get. If you are not able to get a standard credit card, then you can also apply for a secured credit card. In this, you will need to make a security deposit which is usually equal to your credit limit.

Once you have got a credit card, you can get to work. Remember- the way you use your credit card has a direct impact on your credit score. So, be sure to note the following:

• Always pay your credit card bills on time. Every single late payment can have a negative impact.
• Use less than 30% of the credit limit. So, if the limit is Rs. 1 lakh then spend less than Rs. 30,000 per month using your credit card.
• Avoid making minimum payments as they increase debt and hurt the credit Instead, pay in full.

Keep using your credit card for about three months or so. After that, you can apply for your credit report (you get to have one for free every year anyway) from CIBIL or any other popular credit agency. You are likely to find a good credit score in it. You can keep on using your card for longer to increase it further.