If you have never taken a loan or a credit card, it means you don’t have any prior credit history and are considered New to Credit (NTC). Having no credit history means there’s no financial data for lenders to determine your creditworthiness.
Although it may seem like a fresh start, it also gives you the opportunity to shape your financial journey by responsibly using your first credit product. It is your first step towards building a credit history, which lenders evaluate when you apply for a loan or credit card. The way you handle your first credit product directly impacts your credit score. With responsible usage—like timely payments and low credit utilization—you can build a strong credit profile.
A good credit score reflects your creditworthiness, builds trust among lenders, and makes you eligible for better credit cards and loans at favourable interest rates. Here’s how you can start building a strong credit score.
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What is a Credit Score?
A credit score is a three-digit number, ranging between 300 and 900, that reflects your credit behaviour. Whenever you apply for a loan or a credit card, lenders check your credit score to assess your creditworthiness. Your credit score is calculated based on various factors, including number of credit accounts, total debt, repayment history, credit utilization ratio, and more.
Your credit score acts like a financial impression—it shows lenders how trustworthy you are with credit. A high credit score increases your chances of approval for credit cards and loans at better interest rates.
In simple words, a credit score shows how responsibly you’re managing your credit. When you’re new to credit, your first credit product lays the foundation for your financial journey—and that’s why it matters more than you think.
Credit Score Range and Meaning
| Score Band | Category | Meaning |
| <300 | No Score/No History | This indicates that you’ve never used a credit card or taken a loan, so you currently don’t have any credit history. |
| 300-550 | Very Low Credit Score | Your credit history may be impacted, but with the responsible usage, you can improve your credit score. |
| 551-620 | Low Credit Score | Past credit behaviour may not have been ideal, which has affected your credit history. |
| 621-700 | Fair Credit Score | You’re close to building a strong credit score— you should work on improving your score to eligible for better credit offers. |
| 701-749 | Good Credit Score | You’ve managed your credit well and shown responsible financial behaviour. |
| 750+ | Excellent Credit Score | Your credit history is excellent! With this score, you’re more likely to receive credit on favorable terms. |
Importance of a Good Credit Score
By using your first credit product responsibly, you can build a strong credit score, making you eligible for better credit products at favorable rates. Therefore, responsible use of your first credit product is crucial, as it opens doors to:
Easier Credit Approvals: When assessing your creditworthiness, lenders check your credit score. A positive credit history shows a lower risk of default which increases your chances of getting approved for a loan or credit card.
Lower Interest Rates & Higher Credit Limits: A good credit score may help you get loans at lower interest rates or better credit cards with higher credit limits. This is because lenders see you as a responsible borrower, less likely to miss or delay payments.
Builds Trust with Lenders: Making timely payments and maintaining a healthy credit score builds trust with lenders. It shows that you can manage your credit responsibly and are less likely to default in the future.
How is Your Credit Score Generated?
When you first take a credit product, such as a loan or a credit card, the lender reports your credit behaviour to credit bureaus including TransUnion, Experian, Equifax, and CRIF. These bureaus start tracking your credit activity and generate your credit score. On average, it takes about 3–4 months of active credit usage for your score to be generated, as credit bureaus require some history to assess your credit behaviour.
While calculating your credit score, credit bureaus consider the following factors:
Repayment Behaviour (Payment History)
This is the most heavily weighted factor while calculating your credit score. Any missed or late payments are reflected in your credit report under the DPD (Days Past Due) section, which can negatively impact your score. In addition to this, paying only the Minimum Amount Due (MAD) is not a good practice, as the interest is charged on the remaining unpaid balance, and all new purchases become ineligible for the interest-free period—attracting finance charges from the date of purchase. Therefore, make sure to pay your bills in full and on time from day one to build a strong credit profile.
Credit Utilization Ratio (CUR)
This refers to the percentage of your total credit limit that you’re using. It is advisable to not exhaust your credit limit frequently and maintain a low CUR. A high CUR, occasionally with timely full payments, might not hurt your score much. But consistently high utilization over time can significantly reduce your score. In short—the less credit you use, the better it is for your score. While it might be tempting to use your entire credit limit, using it responsibly from day one can help you maintain a good credit score.
Account Age
While calculating your credit score, your account age also plays an important role. The age of your credit account reflects how long you’ve been responsibly handling credit. It is calculated from the date your first loan or credit card was issued. Generally, a longer credit history with timely payments positively impacts your credit score. Lenders are more likely to trust consumers with over 3 years of credit history compared to someone who is new to credit.
Multiple Credit Inquiries
When you’re new to credit, it may seem tempting to apply for multiple credit cards or loans, hoping that at least one gets approved. However, multiple applications in a short period can hurt your score, as it shows that you are credit hungry and are not able to manage your credit responsibly. Therefore, it’s better to apply for one product at a time and wait for at least 3 months before applying again.
Things to Consider Before Availing Your First Credit Product
Here are some key points to consider while availing your first credit product:
- Before applying for your first credit product, make sure you meet the income, age, and documentation requirements to avoid rejection, as it can negatively affect your credit score.
- Choose a credit card or loan that matches your spending habits or financial needs. Look for entry-level or secured cards, or opt for a small consumer durable or a personal loan.
- Be aware of the annual fee, interest rates, late payment charges, and other fees associated with the credit product.
- Start your financial journey with a low credit limit or a small loan amount, as this will help you manage it more easily and reduce the risk of overspending.
- Once you’ve availed your first credit product, use it responsibly by paying bills on time and regularly monitoring your credit score to build a strong credit history.
Tips to Build a Healthy Credit Score
To build a strong credit profile, here are some tips that can help you establish a good credit score:
Start Small with a Secured or Entry-level Card
Many consumers believe they won’t qualify for a loan or credit card without a credit history. However, there are entry-level credit cards specifically designed for individuals who are new to credit. These cards come with relaxed eligibility criteria and can help you build a credit profile. You can also opt for a secured credit card, which is issued against a fixed deposit. Additionally, you can begin your credit journey by taking a small consumer durable loan or a secured personal loan.
Pay Bills on Time
Once you’ve availed a credit product, it’s important to make all your payments on time. Repayment history carries the highest weightage in your credit score calculation. Therefore, you should always pay your credit card bills in full and on or before the due date. Timely payments show that you’re a responsible borrower and improves your chances of getting credit products in the future.
Maintain Low Credit Usage
Along with repayment history, credit utilization ratio (CUR) is another key factor in determining your credit score. While occasionally having a high CUR and paying off your full bill might not affect your score, having a higher CUR consistently can negatively impact your credit score. A higher CUR shows that you are overdependent on credit and makes you look credit hungry.
Limit Credit Applications
Apply for only one credit product at a time. Every time you apply for a loan or credit card, the lender raises a hard inquiry, which gets recorded in your credit report. While a few inquiries don’t hurt your score, multiple hard inquiries within a short period can lower your credit score. So, apply only for products that match your eligibility to avoid unnecessary rejections.
Track Your Credit Score
Once you’ve started your credit journey, monitor your credit score regularly to identify any errors. You can download your free credit report once a year from bureaus like TransUnion, Experian, or Equifax—or check it for free through platforms like Paisabazaar. Regularly checking your credit report will help you identify any errors by reporting it immediately to the lender or the credit bureau.
How to Check Your Credit Score for Free?
To check your credit score for free, you can download a free credit report once a year from bureaus like TransUnion, Experian, and Equifax. Alternatively, you can also check your credit score for free through Paisabazaar by following these steps:
Step 1: Click here to check your credit score for free.
Step 2: Enter the required details such as your name, mobile number, address, etc.
Step 3: Verify your details by entering the OTP sent to your mobile number.
Step 4: Your credit score from multiple credit bureaus will be displayed on the dashboard.
Your first credit product is an important step in building your financial identity. It sets the tone for your financial future and how lenders determine your creditworthiness. However, remember that even a small mistake can have a long-term impact on your credit history. Therefore, responsibly managing your first credit product—paying bills on time, maintaining low credit utilization, and tracking your score regularly—will help you build a strong credit profile.
