Kolkata: Credit score is nothing short of a modern financial lifeline. If one has a strong credit score, it allows one to secure a loan from any bank or NBFC (non-banking financial company). According to traditional views, building a credit score can be attempted only after an individual starts earning. Credit score of an individual is computed after collecting information about his/her financial activities.
A credit score is actually a three digit number (on a scale of 300 to 900) that is determined from data obtained from lenders about an individual. Credit information companies prepare it after analysing credit history, quantum of debt, track record of repayment et including the number of open accounts, total level of debt, track record of repayment etc. By the way, a score above 750 is a good score, while one above 800 is very robust.
How can students try for a good credit score
The first advice experts often share is to get a student card. A student can use it for small purchases and he/she should ensure that the balance is paid in full every month for so that interest need not be paid. If this practice is followed, it can help in building a robust credit history.
Since repayment history is the chief benchmark for a credit history, every student must pay up the outstanding balance every month.
What are student credit cards?
“As the name suggests, a Student Credit Card is a special Credit Card for students who typically don’t have a monthly income or a credit score. A card issuing company like a bank can offer a standalone Credit Card to students or a supplementary card along with their immediate family member’s Credit Card,” says HDFC Bank, the country’s largest credit card issuer.
If a student has a credit card, it can be extremely useful to set up a sound credit history. The point to remember is that the credit utilisation ratio should be kept below 30%. In other words, at no time should the outstanding be above 30% of the credit limit set for the card.
Another point to remember is that lenders always look at the duration of repayment record. The longer the data is for, the more the trust on that data. Students should also remember that if they need a loan, they should not apply in quick succession to different lenders — bank and NBFCs — since it ruins the credit score that they might have built painstakingly. One should apply in a bank and wait patiently to know whether the application has been accepted or rejected.