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.

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.

However, these products should be used only when the borrower can comfortably manage the repayments. A short-term personal loan is another option offered by some NBFCs, particularly to salaried borrowers.

The key is not the number of loans or credit products a person has, but whether they can manage them responsibly. Taking unnecessary debt only to create a credit history can instead put pressure on a young borrower's finances.

"Instead of applying repeatedly with multiple lenders, individuals should first understand the reason for the rejection and then consider products designed for new-to-credit consumers," Agarwal said.

A secured credit card against a fixed deposit can be considered by those looking to establish their credit history. Secured borrowing options such as gold loans and loans against property can also help build a credit record, although these should be considered only when there is a genuine borrowing need and the borrower understands the risks involved.

Once a borrower demonstrates responsible repayment behaviour over time, they may become eligible for a wider range of credit products.

Agarwal recommends avoiding maxing out a credit card, taking unnecessary loans and applying for several credit products at once. Consistent repayments, controlled credit utilisation and limited new credit applications can help establish a stronger credit profile over time.

For a 21-year-old, the objective should therefore be to build a repayment track record, not to borrow more. Good credit habits established early can become useful later when the need for larger loans arises.