No, it is not essential to have a credit card to build credit in India. While having a credit card can be one way to build credit, there are alternative methods that can also help you establish a good credit history.
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Credit Cards
A credit card allows you to get (or borrow) money from the bank to make purchases. If you use it responsibly by paying off your credit card bills every month on time and in full, it can have a positive impact on your credit score. However, if you misuse your credit card by missing payments or overspending, it can harm your credit score.
Loans
Taking out a loan, such as a personal loan, education loan, or a two-wheeler loan, and repaying it on time demonstrates your ability to manage credit responsibly. Making regular, on-time payments towards the loan can help build a positive credit history.
Secured Credit Cards
If you find it challenging to get a regular credit card, you can opt for a secured credit card. For this kind of credit card, you need to deposit a certain amount of money as collateral; your credit limit will be linked to this deposit. Using a secured credit card responsibly could contribute to building credit.
Credit Builder Loans
Some financial institutions offer credit builder loans, where the loan amount is held in a fixed deposit or savings account. You make regular payments towards the loan, and once it is paid off, you receive the money. These loans are made specifically to help individuals build credit.
Utility Bills and Rent Payments
In India, some utility companies and landlords report payment history to credit bureaus. Paying off your utility bills, such as electricity and phone bills, and rent on time can indirectly help improve your credit score.
You can ask a family member or a friend with a good credit score to add yourname as an authorized user on their credit card. Their positive credit behavior may reflect on your credit report, potentially boosting your credit history.
