Credits cards are no more a convenient luxury, with their use getting diversified into being one of the deciding factors of a good credit score. Credit cards are an indispensable tool if they are used wisely. They can be effectively used to improve your budget. Additionally, they improve your credit rating. So, if you have a low credit score, a credit card is a great way to improve your rating. They offer users a large spectrum of services and can be a fantastic way to up your credit score.
Above all uses, credit cards have always been powerful tool for dispersing the cost of borrowing.
Credit Scores and credit card applications
Getting a credit card is now fairly simple. In fact, all you need to have are two documents and banks are willing to approve a credit card application without much delay. You will need to furnish an identity proof and your PAN at the time of application. A few examples of identity proofs are, passport, voter’s ID, license, UID Aadhaar Number, etc.
Once you submit the above mentioned documents, your credit card application undergoes a check on your CIBIL score.
CIBIL score is a score to check your credit worthiness. CIBIL is a storehouse of credit information. It documents all credit related activity you have engaged in with banks and financial institutions. CIBIL collects and organises the credit information provided to them from these lenders in the form of credit reports. It then passes its records on to lenders, when requested, as a proof your creditworthiness.
CIBIL maintains a record of the status of all your loans. It also records data on all credit cards that you have held or hold. CIBIL essentially keeps a tab of your repayments, loan amounts, loan types, outstanding balances and amounts repaid.
Since a CIBIL score runs a trail on your loans and credit cards, the report created thereof also contains your personal information, particularly, your name, date of birth, address, phone number, passport number, voter ID number, PAN number, etc.
Why do banks check your credit score before issuing a credit card?
Credit cards are a form of unsecured lending that banks in India provide solely on the basis of an applicant’s creditworthiness. To avoid taking on risky customers and running the risk of defaults, which lead to losses, banks run a check on credit card applicants. A very simple way to ascertain whether a customer is financial capable of handling a credit card is to check his/her track record when it comes to credit. This is done by accessing credit reports and scores from CIBIL who provides this information on request.
Banks can analyse your record of late payments and defaults by checking your credit score. Additionally, banks can view a record of any loans or credit cards that you currently hold. Banks also use CIBIL score to gauge your diligence towards paying credit card bill.s Furthermore, banks use CIBIL scores to check the number of credit card and loan applications made by you.
Bank oftentimes reject a loan or credit card application due to bad credit history. In fact, having no credit history is also considered poor credit history.
You have the right to obtain your Credit Information Report (CIR) in order to determine your current credit score. A score will be mentioned in your CIR. You can access your Credit Information Report on the CIBIL website. You will be required to fill in some cursory details like your name, ID details, date of birth, contact details, phone numbers, etc. Post that you will be asked to make payment towards your CIR which will come to approximately Rs.470 (current charges are subject to change).
Minimum CIBIL score required to get a credit card
CIBIL scores are generally in the range of 300-900. A good CIBIL score may fall somewhere in the range of 700 upwards. Most banks and financial institutions follow a similar pattern of assigning credit to your rating hence knowing one bank’s minimum CIBIL score for a credit card should be a reasonable basis to determine minimum requirements of banks in general.
Banks usually accept a CIBIL score in the range of 700-750 and above to issue a credit card to an applicant. This is subject to the applicant meeting all other eligibility requirements.
However, there are some credit cards offered to persons with low credit scores.
In order to maintain a good credit score, it is necessary to build a credit record. So, if you don’t already have a credit card, you could consider approaching a bank that you have a good relationship with to obtain one. Additionally, you could check if your company is in good terms with your bank as that will increase your chances of getting a credit card.
If you have a credit record and want to apply for a new credit card or an additional credit card, first check your credit score. If you do apply and get rejected, don’t apply at another company immediately after. Time your second or subsequent applications so that you don’t run the risk of getting rejected again within a short span of time as this is a negative consideration and goes on your credit report.
Also, you will have to manage your credit card bills wisely by paying them on time. Not just that, you must ensure that you pay the entire outstanding balances versus only paying the minimum due. Remember, all outstanding balances when not fully discharged are considered overdue and is recorded as such in your credit report.
It is also advisable to not spend more than 75% of your credit limit or max your card out entirely. This will have a negative effect on your credit score. Credit utilisation should neither be too low or too high to have a positive effect on your rating.
Credit Cards for People with Bad Credit or Low CIBIL scores
Most issuers refrain from giving out credit cards to those with poor credit histories. This is because the risk or delayed payments or defaulting on payments are high. However, sometimes people are pushed into negative payment patterns due to genuine reasons e.g. medical emergencies or loss of employment, which impair their inflow of funds. In order to come up the curve and rebuild creditworthiness, banks offer secured credit cards.
Secured credit cards are credit cards offered against a fixed deposit. In case of default or delay in payments, dues are recovered from funds held by the cardholder in the FD. By making timely payments on credit cards, cardholders can, over a period of time, rebuild faulty credit histories.
Stay ahead of credit card frauds
We carry a great and powerful financial tool with us almost every day, fully aware of its capabilities but yet blissfully ignorant about protecting it. We are talking about the Credit Card, the small piece of plastic which can change our life. While we may not realise its true power until it’s too late, there are thousands of scammers out there who are trying to use this tool for their benefit. Credit card fraud runs into millions of dollars every year and in most cases the actual owner is unaware or clueless as to what happened, losing his/her hard earned money in the process.
Credit card con artists come up with new methods on a regular basis to steal our valuable money, which is why it is critical for us to stay one step ahead of them in order to have peace of mind. Listed below are certain points one should remember in order to avoid falling prey to these predators.
- Update your information- Face it, most of us do not bother about updating our information after we get a credit card. It is possible for us to change our contact details including the phone number and email id, but we fail to realise that the only way for a bank to reach us is through this information. Credit card companies provide information of all transactions on our contact details and not updating them could mean that you would not even be aware if someone used your card for unauthorised purchases.
- Don't entertain telephone calls/emails-A number of fraudsters resort to calling or e-mailing us to avail our credit card information. One should remember that banks do not call for such information and any such call or email should trigger immediate alarm bells in our mind. Your credit card details should be only for you and these should not be shared under any circumstances.
- Replace card if in doubt-There are times when we use our cards in distant places, places where we are not comfortable using them. Card cloning is a common way to steal information and one should ask the bank to replace the card if they feel there is any suspicious activity happening.
- Use secure portals-With online transactions becoming the norm today, millions of us log on to the internet to transfer money or make purchases, providing scammers an ideal opportunity to rip us off. One should remember to use secure websites for all transactions, ensuring that they begin with "https". Also, it is unsafe to participate in such transactions through public computers, as the information can fall in the hands of third party agents.
- Report any misuse immediately-There are chances of us falling victim to credit card fault despite us being safe, in which case we must immediately contact the credit card representatives and inform them. In case of failure to report such incidences within a stipulated time, these companies will put the onus of payment on you, making it even more critical to inform them.
In this dog eat dog world it is imperative for us to stay a step ahead of the rest, and keeping a few points in your mind could ensure that your hard earned money doesn’t fall in the hands of a stranger.
Are your Credit Card applications getting rejected due to a low Credit Score? Here’s what you should do.
Fix errors in your Credit Report. Small changes can make huge impacts.
Ask For A Raise
Ask Credit Card issuers to raise your credit limit. Higher limit = higher utilization score.
Mix And Match
Having different types of credit helps. Try EMI on your Credit Card to pump up your score.
The Double Effect
Split up your Credit Card bills and pay them twice a month. Lower Credit Usage = Higher Credit Score. Having several Credit Cards and keeping low balances on them will up your score. All set?
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Don’t let a Bad Credit Score Prevent you from obtaining a Credit Card
With an exponential growth of credit card users in the country over the last few years, the rise of defaulters have increased as well. While it is quite simple in this day and age to obtain a credit card, a bad credit score can tarnish one’s dream of doing so. However, it is not an impossible task. Starting humbly with a secured credit card with a reasonable limit can be the answer to reviving an individual’s credit score.
A secured credit card is a card that is supported by your savings account. The savings account acts as collateral to your credit card in this case. These cards are relatively easier to obtain, and if used responsibly can improve the Credit Score in a few months’ time, granting access to obtain another card.
Building a good credit history is one of the most important factors that determine your credit score. Apart from just building a good credit score, having a secured credit card is also simple to obtain as there is no income proof required. And, in most cases, banks will approve these cards for low salaried individuals as well.
The next step, after getting a secured card, is to maintain it and diligently pay off the debts to be on the way to a good score.
FAQs on CIBIL Score for Credit Card
Q. What is the minimum CIBIL score required to avail a credit card?
Different banks have different limits for CIBIL score in order to furnish credit cards to customers. Generally, banks in India consider a CIBIL score of 700 and above to be good for granting financial (products and services) requests made by customers.