Establishing good credit with your first salary in India is a smart move that can set you up for a better financial future. Here's a step-by-step guide in simple words:
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Open a Bank Account
Start by opening a savings account in a reputable bank. Having a bank account shows stability and is the first step towards building credit.
Get a Credit Card
Many banks offer credit cards to individuals with a stable income, even if you are new to credit. Look for a basic credit card with no annual fees and a low credit limit. This will help you build credit while keeping your spending in check.
Make Small Purchases
Use your credit card for small, regular expenses like groceries or utility bills. Always spend within your means and avoid overspending.
Pay Your Bills On Time
This is crucial! Pay your credit card bills and other utility bills on time, every time. Timely payments assure lenders that you are responsible and can be trusted with credit.
Don't Max Out Your Credit Card
Avoid using your credit card right up to its maximum limit. Lenders prefer to see that you are using only a small portion of your available credit (ideally below 30%).
Avoid Multiple Credit Applications
When you apply for any kind of credit or loan, it leaves a mark on your credit report. Avoid making multiple applications in a short period as it may raise concerns for lenders.
Maintain a Budget
Keep track of your expenses and income. Create a budget to ensure you don't overspend and have enough money to pay your bills.
Consider a Secured Credit Card
If you're having difficulty getting a regular credit card, you can opt for a secured credit card. This requires a deposit, and your credit limit is usually equal to the deposit amount. It's a good way to build credit if you're just starting.
Keep Older Accounts Open
As time goes on, your credit history will improve. Avoid closing old credit card accounts, as a longer credit history can positively limpact your credit score.
Regularly Check Your Credit Report
Keep an eye on your credit report to make sure that there are no errors or fraudulent activities. You are entitled to one free credit report per year from each credit bureau in India.
