How to Use a Consumer Goods Loan to Build Your Credit Score

A Consumer Goods Loan primarily helps you with necessary or luxurious expenses, but it can also be an effective tool to build your credit score when you repay it on time. This will be especially helpful for individuals with no prior credit history. Read on to understand the best ways to build your credit with a Consumer Goods Loan.

A Practical Guide to Building Credit With Your Consumer Goods Loan

Apply Judiciously

Each time you make a credit application, the lender conducts a “hard enquiry”, which temporarily drops your score, and the application is noted in your credit report. Several hard enquiries within a space of time can notably reduce your credit score and indicate to potential lenders that you are credit-hungry.

A good solution is an EMI card that eliminates the hassles of re-applying for every purchase you make. This is a pre-approved digital credit line designed specifically for buying consumer goods and converting the cost into EMIs. It simplifies the process of financing multiple purchases without requiring separate loan applications each time.

You can also consider making multiple purchases under a single consolidated Consumer Durable Loan. Ask your retailer for more information on this option.

Also Read: How EMI Cards Can Help Improve Your Credit Score

Choose a Loan Amount and Tenure Responsibly

When you take a Consumer Durable Loan, borrowing only the amount you require and can afford to repay is important. This is because a poorly calculated EMI tenure puts you at risk of missed payments or a loan default, both of which have negative impacts on your credit. 

An ideal approach is to have an upper limit on expenditures. Before shopping, use an EMI calculator to input the amount (which would presumably be the loan amount you need to pay off) and understand what your EMIs and tenures could look like.

Keep in mind a few basics, such as managing larger amounts more easily over longer tenures. This self-disciplined behaviour maintains a healthy debt-to-income ratio, ensuring you will never be at risk of defaulting on a payment.

Be Consistent and Disciplined With EMI Payments

Related to the above point is the importance of mastering your EMI payments. On-time payments are a crucial part of credit building and improvement, as they have the most significant impact on your score.

A delay of as little as 30 days can lower your score by as much as 90 to 100 points. Additionally, according to the RBI’s mandate, which has been effective since January 2025, lenders are required to update credit bureau records every 15 days instead of every month. This means that any missed payments will reflect on your score much faster.

The best way to ensure you never miss a due date is to set up an auto-debit or a NACH (National Automated Clearing House) mandate with your bank. This automatically transfers the EMI amount to the lender on a fixed date each month. Explore the option of a consolidated Consumer Durable Loan to make financial management easier each month.

Also Read: Benefits of Bringing Home an Air Conditioner on EMI This Summer

Enhance Credit Balance

Having a healthy mix of credit, including both revolving lines and instalment credit, plays a key role in increasing your score. Therefore, instead of making purchases on credit cards, opting for a Consumer Durable Loan can be a more effective solution.

This is particularly beneficial if you already have secured credit, such as a home loan or Pre-owned, on your profile. Adding an unsecured loan, such as a Consumer Durable Loan, to the mix gives your credit profile variety. With a combination of secured and unsecured credit, lenders perceive you as a responsible borrower, thereby improving your creditworthiness.

Regularly Check Your Credit Report

As you repay the loan over the tenure, make it a practice to check your credit report periodically. This will show you the progress you’ve been making alongside any potential errors or reporting mistakes. If left unchecked, these errors can significantly damage the score that you’ve worked hard to build.

Also Read: How to Use Consumer Durable Loans for Diwali Home Makeovers

To Conclude

A Consumer Durable Loan isn’t just a means to buy a household appliance; it is also a significant step to establish financial credibility. Responsible borrowing, coupled with regular repayment, is key to a good credit score. Keep these in mind, and you will be able to build creditworthiness effectively.

Poonawalla Fincorp offers Consumer Durable Loans and EMI Cards, making spending stress-free and seamless. Apply today!

FAQs

Does a Consumer Durable Loan improve my CIBIL score? 
Yes, a Consumer Durable Loan can help improve your CIBIL score. When you pay your EMIs on time, the lender reports this positive payment behaviour to CIBIL. This demonstrates financial discipline and strengthens your credit history over time.

What is the minimum credit score needed for a Consumer Goods Loan? 
While criteria vary by lender, most NBFCs require a credit score of 650 or higher for a Consumer Goods Loan. However, some lenders may offer loans to individuals with a lower score or even those new to credit, often with different terms.

What happens if I miss a Consumer Durable Loan EMI? 
Missing an EMI payment will be reported to credit bureaus, which can negatively impact your credit score. Lenders will also charge a late payment fee as per the loan agreement. Consistent defaults can severely damage your creditworthiness and affect future loan eligibility.

How quickly does a loan show up on my credit report? 
Typically, a new loan account will appear on your credit report within 30 to 60 days after the first EMI payment cycle. Lenders usually report account data to the credit bureaus every 15 days, depending on their individual reporting schedules.

Is it a good idea to pre-close a Consumer Durable Loan? 
While pre-closing a loan saves you from paying further interest, it may not always be the best option for credit building. A longer history of on-time payments is generally viewed more favourably. Therefore, keeping the loan for its full tenure can be more beneficial for strengthening your credit score.

What is the difference between an EMI Card and a credit card? 
An EMI card is primarily a pre-approved loan instrument used to convert purchases into easy EMIs, often at partner stores. A credit card is a revolving credit line that can be used for a broader range of transactions, including cash withdrawals and EMIs, and often comes with rewards and additional fees.

Can I apply for a Consumer Durable Loan with no credit history? 
Yes, many individuals with no prior credit history can apply for consumer durable loans. These loans are often considered a great way for “new-to-credit” individuals to start building a positive credit profile from scratch with a small, manageable debt.

How does a Consumer Durable Loan affect my credit mix? 
A Consumer Durable Loan positively affects your credit mix by adding an instalment loan to your profile. Lenders prefer to see a mix of credit types, as it shows you can manage various kinds of debt responsibly.