India is fast becoming a credit driven economy. Whether its home loans, personal loans, or credit card debt, all of us are using debt far more than was popular in our parents' generation. In this context, it is very important to build one's credit history, so that one can continue to have access to such types of loans. If you maintain a poor history of taking loans and not repaying them or delaying your repayment, your creditworthiness will suffer and you might not get a loan.

Here are a few basics to follow while building up your credit history:

• Pay your bills on time: Pay all your telephone bills, mobile phone bills, electricity bills and other bills on time. Use an direct debit facilities that banks offer, or an electronic transfer to facilitate on-time payment. Often many credit rating agencies are looking at your history of paying your bills on time as a surrogate for your creditworthiness.


• Apply for a credit card judiciously: Don’t apply for too many credit cards - too many card applications in a short time might project you as a risky customer. Additionally, apply only for those cards whose requirements you are likely to meet. Remember, the more cards you get rejected for, the more adverse impact it will have on your credit history.



• Cancel unused credit cards: If you have a number of credit cards and are not using them then cancel them immediately. If you restrict your active cards to only two, you will find it easier to manage your accounts. The more cards you have, the more risk you face of credit card fraud, and of late payments on additional cards.



• Pay your credit card dues promptly: Always pay your credit card bills on time, and preferably avoid carrying any balance due on your cards. In the very least, you should always pay the minimum balance due every month. If you build a history of paying your full balance on time, it will help you build a positive credit history.



• Pay off outstanding loans at the earliest: If you have any loans to pay, wherever possible pay them off at the earliest. Use any surplus income to pay off your debts first. Don’t keep adding to your credit burden. This will increase the belief that lenders can put in your ability to repay a loan you might want from them.



• Restrict yourself to the available credit limits:Don't stretch your loan amount, stay within the limits that have been set for you. The more you stretch beyond your existing loans, the further you will likely fall into a debt trap.



• Establish an emergency fund: Maintain an emergency fund to dip into as a fall back for any contingencies that you might face. In case of an emergency, rather than borrowing under unfavourable terms, you can have the cushion of using your emergency fund.

Things to remember:

• The key to building a good credit history is to pay all your bills on time, always.


• Restrict the number of credit cards you have and use them responsibly – pay your dues on time.


• Restrict yourself to stay within the credit limits that have been set for you. Don't fall into a debt trap or seek overdraft facilities.