Credit score or CIBIL score is an important deciding factor when you apply for a credit card. Usually, a respectable credit score makes it easier to get a new credit card. So before looking at how to improve CIBIL score, let us understand what it means.
What is a CIBIL Score?
It is a three-digit summary of your credit history. It is based on the data in your CIBIL report, a document that displays your loan accounts, outstanding payments, credit cards, etc. Your credit score is a measurement of your credit-worthiness that helps lenders decide if they want to lend money to you or not. It is expressed in numbers from 300-900.
How does your CIBIL Score affect your Credit Card Application?
These days, most people who want a credit card apply online, as it is convenient. When you apply for a credit card online or offline, the bank will first check your CIBIL score and credit report. If your score is low, your application would probably not be considered. A credit score higher than 700 is generally considered good enough to gain instant approval for credit.
How to improve CIBIL Score?
Here are a few basic ways to improve your credit score and ease your credit card application process.
1. Make Payments on Time
Your past payment history is considered to be a good indicator of your future payment habits when you apply for a credit card online or offline. The most important part about having a credit card is the credit card payment. Delaying payments such as credit card bills, loan EMIs, rent, utility bills, etc. can have a negative effect on your credit score. You can set reminders or standing instructions for periodic payments to be debited from your bank account on time and try to improve CIBIL score.
2. Maintain your Credit Utilization Ratio
Your credit utilization ratio is your total credit card balance divided by your total credit limit. If you add your credit card statement balances for 12 months and divide them by 12, you’ll get your average credit utilization ratio for the year. If this ratio is 30% or lesser and you need a credit card, apply online with assurance. A good credit utilization ratio contributes to a good credit score.
3. Don’t Apply for Too much Credit
If you apply for unnecessary credit cards, you can increase your total effective credit limit. However, it also creates hard inquiries on the credit report. A lot of hard inquiries can affect your credit score negatively and won’t improve your CIBIL score. Although the effect won’t be severe, it is better to keep your borrowing to a minimum and try for instant approval with a good credit score.
4. Verify Credit Reports Regularly
Whether you want to apply for a credit card online immediately or not, you should keep checking your credit report from all the three credit reporting bureaus, Experian, Equifax, and TransUnion. Check for inaccuracies and get them corrected immediately. Only when you’re assured of the accuracy of your credit reports, should you check for a credit card, apply online or offline, and keep checking reports later too.
Can you get a Credit Card with a low CIBIL Score?
Although it is difficult to apply for a credit card with a low credit score, it isn’t impossible. There are a few ways to get around it and still obtain credit.
How to get a credit card with low CIBIL Score?
Here are a few alternatives to regular credit cards for persons with low CIBIL scores.
1. Secured Credit Cards:
You can obtain a secured credit card by opening an FD (fixed deposit) with the lending bank. The bank then issues a credit card with a limit of 50%-100% of the deposit amount.
2. Add-on Credit Cards:
If you have a primary credit card held by a family member, you can also apply for an add-on card. It offers benefits similar to the primary card, but the credit limit will be divided between both cards.
3. Credit Cards against Savings Account:
Some major banks offer credit cards against a certain amount deposited in your savings account. This way, you can get a credit card with low CIBIL score.
4. Prepaid Credit Cards:
Prepaid credit card is another option provided by major financial institutions and banks. It works just like a prepaid phone recharge. You deposit a certain amount initially and then use it over a period of time.
Now that you know your way around credit card applications, you can easily go ahead and apply for a credit card online, and be able to spend it in no time.
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