How to Build Your CIBIL Score from Scratch: A 2026 Guide for First-Time Borrowers

Table of Contents

• Introduction to Credit Building
• Why is a Good Credit Score Important?
• Understanding How Credit Works
• Tips to Build Your Credit Score
  • Secured Credit Card
  • New Credit Card with Your Bank
  • Low Credit Utilization Rate
  • Consumer Durable Loan
  • Buy Now Pay Later (BNPL)
  • Timely Repayments
  • Monitor the Credit Report

Introduction to Credit Building

Building credit is important to reveal your financial reliability and health. A good credit score involves developing a history of borrowing credit and repaying it responsibly for a while. If you are a New-to-Credit (NTC) individual, you may not have a credit score. This is mainly because NTC borrowers have no history of availing any credit products, such as loans or credit cards. Lenders cannot evaluate their financial creditworthiness and may see them as high-risk borrowers. As a result, such borrowers face challenges in securing good loans or credit card offers. So, if you are a young adult or a new graduate just starting your independent financial journey, you need to start building a credit history now.  

Why is a Good Credit Score Important?

A credit score not only influences your creditworthiness for borrowing but also affects the credit limit offered and the repayment terms. A good credit score rewards responsible financial behaviour and offers a plethora of financial opportunities. It can make the borrower eligible for higher credit limits and lower interest rates. Also, loan approval can be swift in case of a good credit score. Another key benefit is increased negotiating power, as you can take the benefit of a good credit profile to bargain for favourable terms such as lower processing charges and interest rates. Overall, a good credit score lays a solid foundation for your financial flexibility and stability for a lifetime.

Understanding How Credit Works

Credit involves an agreement between a borrower and a lender in which the former obtains a product or service that must be repaid with interest within a set period. In simple terms, credit allows a borrower to get immediate funds and repay them over time. The credit history of the borrower showcases how well or how badly they have managed debt historically. For this purpose, a credit report is generated by accessing all your past debts and payment information from the lenders. Based on this, a credit score is calculated to reflect your financial creditworthiness. Below are the main types of credit you can avail:

• Revolving credit: Allows borrowing money up to a maximum limit. Once paid back, you can borrow again. Examples include a line of credit and credit cards.
• Instalment credit: Offers a lump-sum amount to borrowers, which is repaid in recurring instalments over the loan tenure. Examples include student loans, personal loans and auto loans.
• Service credit: This credit type permits the use of services like mobile phones and utilities, with a fixed billing cycle.  

Tips to Build Your Credit Score

If you have no credit history, starting from scratch, you can consider the following options:

Secured Credit Card

A secured credit card is an excellent beginning point for NTC individuals and borrowers with poor credit history. You can get this credit card through a fixed deposit, which acts as collateral. Generally, this FD (or a part of it) is offered as the credit limit. With timely repayments and responsible financial behaviour, a credit history can be built steadily. Approval of secured credit card applications becomes easier with a fixed deposit account.

New Credit Card with Your Bank

Most individuals already have a financial relationship with a bank, including a business, salary or current account. If you have good relations with the bank due to your healthy and responsible financial behaviour, you can choose it to apply for a credit card. As the bank has access to your financial history, the credit card application is hassle-free, and the approval chances also increase. Several banks offer specific credit cards for new salaried employees or first-time borrowers. Get a credit card from your bank and begin your credit journey. Note that applying for multiple credit cards frequently is not recommended, as it suggests financial instability or desperation. Also, credit rejection from financial institutions can severely hit your credit score.

Low Credit Utilization Rate

The Credit Utilisation Rate (CUR) shows the percentage of available credit relative to the credit card holder's total credit limit. It can be evaluated as the ratio of the used credit limit to the allocated credit limit. A low CUR indicates responsible credit management, as it shows you are not heavily dependent on available credit to meet your demands. Overdependence on credit for new borrowers is not seen positively by lenders. Typically, a credit utilization rate below 30% is considered good for borrowers. So, maintain your CUR as low as possible and repay on time to build a good credit profile.   

Consumer Durable Loan

A consumer durable loan is a valuable financial tool for first-time borrowers to start building credit. Using this financing, you can cover the full upfront costs of essential consumer durables, including lifestyle products, electronics and household appliances. In addition to making the purchase more affordable, these loans usually require minimal documentation and ensure fast approval. Thus, NTC customers can use consumer durable loans, which are easier to avail than other financial products, like home loans, personal loans and auto loans. You can make timely EMI payments to build a positive credit profile.

Buy Now Pay Later (BNPL)

Buy Now Pay Later (BNPL) is a short-term debt financing method that allows you to buy products without paying the full amount upfront. It is usually preferred for relatively lower-priced products and retail transactions. For instance, Amazon has the provision of the BNPL facility via its Amazon Pay Later service. This is why BNPL is an effective payment method for new borrowers looking to build credit. BNPL is offered by fintechs, e-commerce marketplaces, etc, by partnering with banks or NBFCs. Credit information companies (CICs) receive the financial data related to repayments from these banks/NBFCs. You can start building credit with small monthly purchases using the BNPL facility and paying it back on time.

Timely Repayments

Paying back on time is among the most crucial factors to maintain a positive credit profile. If you make timely repayments on a regular basis, it is an indication of strong financial discipline, which demonstrates reliability to lenders. Each timely payment contributes positively to your credit report, increasing your credit score little by little. In addition to lowering credit score, late payments can attract late fees and penalty charges. So, be a credit-responsible borrower by paying off your credit card bills and loan EMIs on time.

Monitor the Credit Report

It is important to regularly review your credit score and report. If your score declines, take note of your past mistakes and improve your financial behaviour. It may take some time, but your credit profile can improve with responsible borrowing. Also, if you find any discrepancy in your credit report, you can report it to the credit bureau and the concerned lender. 

To conclude, credit building is an important step towards starting your journey to financial stability. Keep in mind the responsible financial habits mentioned in this blog to ensure a positive credit profile. You also need patience if you are building credit from scratch, as it is a time-consuming process. Make the most of the financial opportunities available with a good credit score.