As of April 2020, the total number of credit cards in circulation in India was 57.4 million. This noted for a drop of 3 lakh cardholders in just a month’s time. Due to the prevalent economic instability, a large number of credit card users decided to surrender their existing card this year.
The number of new applications was also limited, thanks to the stringent credit score requirements to avail such credit cards.
Apply for a card with a high CIBIL score
TransUnion CIBIL maintains a record of each user’s or enterprise’s credit scores in their database. During loan or credit card applications, financing institutions submit an official enquiry to this credit information company to know more about each borrowers’ score.
Credit rating is a measure of one’s creditworthiness, which determines whether he/she can handle debt responsibly and efficiently. Poor scores on this scale (below 700) generally disqualify individuals when availing unsecured forms of credit. Thus, when opting for a credit card from reputed NBFCs, a score of 750 or more is mandatory.
An interesting fact to mention here is that individuals with existing cards can use them to improve their credit scores. Servicing the bills on time and in full is the easiest way to build your ratings. Contrarily, paying only the minimum amount due can hamper one’s scores, putting him/her in the back foot when availing additional cards in the future.
Building your credit score to qualify for credit cards
If an individual currently has credit scores lower than what is required, he/she can utilise one or more of these steps to improve the same –
- Repay your dues on time without fail
Whether an individual is currently servicing EMIs for a loan or paying credit card bills, each of these actions has a significant impact on your scores. One must ensure to pay EMIs and outstanding debt before the due date. Delaying such payments would result in additional charges, in the form of penalties. Moreover, delayed payments also lower your credit scores, thereby limiting your chances to avail credit cards.
- Limit credit inquiries
The easiest way to prevent credit rating loss is to avoid excessive applications for loans and other credit products. An individual applying for too many loans or cards at once may risk lowering his/her scores. Such activities on your profile are considered as being credit hungry by lending institutions.
- Ensure a balance credit mix
A proper credit mix is nothing but a homogeneous distribution of secured and unsecured forms of debt in your credit profile. Thus, if one has too many unsecured debts, he/she should pick secured alternatives and vice versa. Mixing and matching the various types of loans should help build a variegated profile, along with robust credit scores.
- Limit credit utilisation ratio
Responsible usage of credit is the key to maintain and improve CIBIL scores. For instance, an individual with an existing credit card should limit monthly expenses to around 40% of the approved limit, instead of spending substantially. This ability to control credit usage is perceived as being responsible by financial institutions.
Interestingly, apart from helping acquire new cards, following this tip should also increase credit card limit on existing ones.
Still, if one fails to maintain the minimum credit score requirements necessary for credit cards, he/she can opt for secured alternatives.
What are secured credit cards?
Secured cards are credit cards, which are offered against hypothecated assets. For instance, you can avail a credit card against a fixed deposit account you have with your chosen financial institution. Keep in mind that in case of secured cards, the credit limit is determined as per the value of the underlying security.
Thus, if your fixed deposit is worth Rs. 1 lakh, your card issuer may offer a limit of around Rs. 80000.
Along with the stringent spending constraints, secured credit cards may not come with the favourable terms of their unsecured counterparts. Thus, one should always try to meet the various requirements to acquire a standard credit card.
Some premium cards also enable hefty savings on every expense, thanks to their attractive reward point redemption feature. For example, the Bajaj Finserv RBL Bank SuperCard provides welcome rewards, accelerating your annual savings by Rs.55000.
The NBFC also provides pre-approved offers on credit cards, personal loans, business loans and other financial products. These offers expedite the borrowing process, enabling one to access credit faster. You can check your pre-approved offer by providing a few essential details.
Besides knowing the credit score requirements, an applicant should also educate himself/herself regarding the other eligibility criteria and application process. Choose the financial institution before figuring out how to apply for credit card. Each company may have a different process to follow. Nevertheless, most NBFCs today offer the online credit card application facility for boosted convenience.