Building a Solid Credit History: An Essential for People Starting Out

You might be in college, balancing lectures and late-night assignments or you've just stepped into your first job and figuring out pay cheques and personal budgets. Life's a mix of deadlines, dreams and digital distractions. Between classes or work shifts, you're juggling expenses for coffee runs, online shopping and streaming subscriptions. It's all about living life on your terms.

But behind the scenes, there's something quietly shaping your future moves. It's not your savings account or the cashback offers you chase. It's something less visible but way more powerful - your credit score. This three-digit number could decide if you get the keys to that dream apartment, a new vehicle or even a shot at your passion project.

Most of us don't think about it, but every swipe and spend is shaping this credit score. And learning to master it early is the real power. Here are quick lessons to get you started:

Start early

• Building a credit history takes time, so it's best to start as soon as possible. If you're a student, consider applying for a student credit card or a secured credit card.
• Use it for small, manageable expenses and make sure to pay it off on time each month. This helps establish a positive track record.
• The longer your credit history, the better it looks to lenders in the future. This is because they prefer to see a consistent history of responsible borrowing.

Building a credit profile responsibly

• Borrow smartly and pay back what you owe. Avoid maxing out your credit limit, even if it's available to you.
• Ideally, you should use only a portion of your available credit (preferably less than 30% of your credit limit).
• Timely bill payments are crucial. Missed or late payments can significantly damage your credit score and stay on your record for years.
• Keeping a low balance and making payments on time consistently shows lenders that you're a responsible borrower.

Keep track of your activities on your credit report

• Your credit report contains the history of your borrowing and repayment behaviour. It's important to review it for any errors or signs of fraud.
• Credit bureaus allow you to access a free credit report annually.
• Reviewing your credit report helps you spot issues like incorrect information, fraudulent activity or identity theft. Correcting these errors on time ensures your credit score stays accurate and unaffected by false data.

Get a good credit mix

• Lenders prefer to see that you can handle different types of credit. This could include a mix of credit cards, personal loans, student loans or other forms of credit.
• Having a variety of credit types shows that you're capable of managing different financial obligations.
• However, this doesn't mean you should open multiple accounts at once. Take on new credit only when needed and ensure you can manage it responsibly.
• A healthy credit mix demonstrates to lenders that you're versatile in managing credit. This can positively impact your credit score.

Boost your credit score today

Boosting your credit score isn't a one-time task - it's a journey of smart financial habits. Every on-time payment, controlled spending and thoughtful use of credit takes you one step closer to a stronger financial future. Your credit score is your key to better loans, lower interest rates and more financial freedom.

Start early, stay consistent and keep an eye on your credit report. Remember, every small action today shapes the big opportunities of tomorrow. Whether it's that dream apartment, a new car or a personal goal, a strong credit score can open those doors. Take control of your financial story and start building your credit score today!

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.