Here's my advice (that no one asked for but someone may need) based on how I started with my credit card journey. Note my CIBIL is 802 and I have no secured loans such as home or car loans. Just credit cards, which are unsecured.
Here's how I started and how I'll say everyone who is starting with their credit journey should go by. (note: this advice is only for working professionals who are salaried; No FD needed).
Hope this was helpful to someone. Happy to hear others view and have a healthy discussion.
1RC
Here's how I started and how I'll say everyone who is starting with their credit journey should go by. (note: this advice is only for working professionals who are salaried; No FD needed).
- If you have a salary account with ANY Indian bank, again I am talking about Salary Account and not Savings here and there is a reason. If you have a savings then get it converted to salary, wherein you'll be asked to furnish payslips. Do that and get yourself a salary account.
- Same bank where you have your salary account - apply for their most basic LTF card (read further, why). Don't go all fancy on cards with rewards or cash back which come with some heafty annual fee. Find a card that is either zero fee or a very nominal fee, which feels penny change to you. Banks are generally very open to giving out credit cards to salary account holders, because they understand the expected flow of income.
- Your credit limit on your first card will not be too high to write home about. But it will be 1.2x - 2.0x of your monthly salary credit. That's good enough.
- Make sure that you regularly use it for the next 4-5 months. I suggest 10-30% of your credit limit. After 3-4 months of regular use. Your Cibil will be close to 750. That's what any average Indian gets who is paying bills on time and is under the 30% util.
- Post 6th month stop using the card. Pay off all your balance and let your card cool off. Basically forget about it. Stop using your credit card for a month or two. Your bank (lender) reports all outstanding balance / bill every month. But on the 2nd month of no use, your CIBIL will go up my 8 points as utilization ratio continues to be 0.0%.
- After you have used your card for 4-5 months and cooled it off for 2 months. You need to do two things post 6th month.
- Apply for a new card from a different bank, which is premium and has rewards/cashback features. Apply by giving your salary slip if your take home has increased (preferably apply offline).
- Ask your current credit card leader if there is any limit enhancement offer (usually given after 6 months of issuance/upgrade).
- Adding a new line of credit or saying yes to limit enhancements, increases your denominator of credit utilization ratio.
- Circling back to point #2 why I asked you to get your first credit card as a free or very nominal fee card. Because always remember - avoid closing your OLDEST line of credit via credit card. Keep your oldest card alive as it adds depth to your credit history. Hence get a free card which will not be a pain in future even if you don't love it anymore. You can always get the fancy cards and close it if you don't like it but never close your oldest card. A credit history of 7+ years is a great history. With time your CIBIL will go up as long as you continue to pay on time.
- Finally stick to just 2 credit cards in the early years of your credit history. After you have a mature credit history, only then explore the credit card market.
Hope this was helpful to someone. Happy to hear others view and have a healthy discussion.
1RC
