While having no credit history and no credit score doesn't mean you have bad credit, it can make it difficult to build a good credit score.
If you have never used a credit card, or you have never taken a loan, you will not have a credit history. This is because most credit scoring models use these credit reports to determine your score. Thus, if this information is not there, they can't create a score or report.
In such situations, here is what you can do to start building credit:
- Get a secured credit card – A secured credit card is one where you regularly pay off your dues. Try to take one out against a fixed deposit with a bank where you already have an account. Your bank will set the minimum deposit amount you need to maintain to apply for a credit card.
- Ensure you can repay bills on time – In order to construct a good credit history, you must be able to repay all your dues at regular intervals.
- Monitor your credit card usage – Since your credit behaviour will be reported to credit bureaus, monitor how you use your credit.
- Become an authorized user on someone else's credit card – You can also opt to be added as an authorized user on a family member’s credit card. You might get a card attached to this primary cardholder's account, and they will be responsible for ensuring that bills are paid on time. This usage will help start your credit history.
- Apply for a loan with a guarantor/ co-applicant – If you need a loan but you don’t yet have a credit history, apply for credit with a guarantor or a co-applicant. This will help strengthen your credit record as the loan will appear on both credit reports. However, remember to be responsible with repayment, as defaults can affect not only your credit score but that of the other party as well.