Starting your first job at 21? Here’s how to start building your credit score without taking unnecessary financial risk

Starting a credit journey at 21 does not mean taking on unnecessary debt. A secured or entry-level credit card, disciplined spending, timely full repayments and controlled credit utilisation can help young borrowers build a strong credit history.

For a 21-year-old entering the workforce, building a credit history may not seem important when loans or major purchases are still years away. But establishing a responsible credit track record early can make it easier to access credit later, when borrowing for a car, home or other large expenses becomes necessary.

The first step does not necessarily have to involve taking a large loan. Starting with a credit product that can be managed comfortably and demonstrating consistent repayment behaviour can help a young borrower establish a credit profile.

Start small with your first credit product

A secured credit card backed by a fixed deposit can be one option for someone with no credit history. An entry-level unsecured credit card may also be suitable for those who meet the eligibility criteria, said Santosh Agarwal, CEO, Paisabazaar.

The focus should be on using the card responsibly rather than treating the available credit as additional income. A young borrower can use the card for routine expenses and pay the total outstanding amount by the due date every month.

“Regular use for everyday expenses, coupled with timely repayment and controlled credit utilisation, can help build a positive credit profile over time,” Agarwal said.

Don't borrow just to build a score

A 21-year-old does not necessarily need to take a loan simply to create a credit history. If credit is required for a planned purchase, products such as a consumer durable loan or BNPL facility can also contribute to a credit history when repayments are made on time.