Credit cards are widely useful in dealing with multiple short-term financial requirements. Such cards help you avoid utilising your savings and meet the required finances with a pre-set line of credit offered by the card issuer.
As a prospective new user, you need meet certain eligibility criteria to avail the best credit card in India. One of these requirements is your credit card score. If you do not maintain a proper score, most NBFCs will reject your application for a credit card.
What is credit card score?
The credit score is a way of quantifying the creditworthiness of a person. While there are multiple organizations that maintain a credit rating today, CIBIL is considered as the topmost authority. The CIBIL score serves as one of the most vital pointers of eligibility to avail a credit card.
Your credit score depends on a number of factors, such as your debt repayment history, the ratio of secured and unsecured loans availed, etc. Most financing companies require you to maintain a score over 750 if you want to avail of a card from them, failing which you may face credit card rejection.
How does credit score affect your chances of availing a credit card?
While every financing company will look into other details, such as your income, the determining factor when it comes to issuing such a card is the credit rating. A poor CIBIL score is the most common reason for credit card rejection. Here are some reasons that are responsible for low scores.
- Late payment of previous loans- If you availed a loan in the past and failed to pay it back on time, your credit score will suffer. Defaulting or late EMI payments can severely hamper your CIBIL score.
- Loan application with multiple lenders- If you apply for a loan simultaneously with multiple lenders, your credit rating will suffer. Therefore, it is better to apply for the loan to just one lender at a time.
If you never availed a loan or used a credit card in the past, it is likely that your CIBIL will be null. In such a case, you need to build a credit score before you apply for a card. Some financial institutions offer secured credit card to people with low or no credit ratings. They can then use these cards to build their CIBIL scores.
Ways to improve your credit score
Now that you know that a good credit rating is crucial to avail credit cards and loans, here are a few steps you can take to push your credit score beyond the 750 marks.
- Clear off all existing debt
If you availed a loan or used a credit card, make sure you pay off all your dues. In case of credit cards, make sure you plan the expenses made on the card so that you can repay them preferably within the due date. Convert your large purchases and other credit card dues into EMIs to help spread the total cost over multiple months. Note that missed payments or paying just the minimum amount will negatively affect your credit or CIBIL score.
- Do not spend more than 30% of your credit limit
If you opt for a credit card with a credit limit of Rs. 1 Lakh, you must keep the card expenses below Rs. 40,000. Exceeding 40% of the credit limit may hamper your credit ratings. Instead, you can ask your credit card company to increase your credit limit, if you need to avail higher credit amounts from the card, so that you can still maintain the 40% ratio.
Keep these pointers in mind to increase your CIBIL score before you apply for a card to benefit from the best terms and features. If you have a CIBIL score around or above 750, you can opt for leading credit cards in the Indian market such as the Bajaj Finserv RBL Bank SuperCard. It comes with various industry-first features such as interest-free ATM cash withdrawals, emergency personal loans, in-built security, etc.
Maintaining your credit card score is of the utmost importance. A good score will allow you to avail the best loans and credit cards on offer from leading NBFCs in the country.