What is CIBIL Score for Credit Cards and How to Improve it?

“According to Customer Priorities-Credit Users in India, the Indian Credit Card Industry is expected to grow at a CAGR of over 25% during 2020-2025. The expected growth is the result of increased demand for credit cards and the trend of buying products first and making payments later.

In the year 2019, there are over 52 million credit card users in India. With the steady growth of credit cards, banks are expanding their reach to urban and semi-urban markets to increase their share in the market.

Source: Research and Markets

These numbers highlight the importance of credit cards and their rapid growth in the Indian market. With the rising importance and use of credit cards, the importance of CIBIL score increases, making it important to discuss, analyze and achieve a good CIBIL score. 

CIBIL score defines the creditworthiness of a user and affects the decision of lenders, financial institutions and banks whether to approve or reject a user’s loan application or not. In addition to this, a user with a good CIBIL score can enjoy perks such as credit card based deals & discounts, offers, access to popular credit cards, etc.

This blog highlights the importance of a CIBIL score for a credit card, its benefits and explains whether or not you can obtain a credit card with a low score.

What is a Good CIBIL Score for a Credit Card?

The CIBIL score can range anywhere between 300 and 900. It is calculated by analyzing multiple factors such as the user’s payment history, the balance between secured and unsecured loans, use of credit utilization ratio, number of delayed or settled payments, hard inquiries within a particular time period, etc.

The table below shows the different credit score ranges and their implications-

CIBIL Score

Meaning

300-549

  • Poor CIBIL score
  • Highlights irregular payment
  • Payment defaulter
  • Credit dependency

550- 649

  • Fair CIBIL score
  • Casual payment behaviour
  • Too many hard inquiries

650-749

  • Satisfactory CIBIL score
  • Responsible payment history
  • No-error credit history
  • Entitled for Credit card and loans
  • Fewer chances of turning into a defaulter
  • High rate of interest

750-900

  • Excellent CIBIL score
  • Responsible payment habits
  • No defaults in payment
  • Error-free payment history
  • No outstanding balance
  • Higher negotiation capabilities
  • Null chances of turning into a defaulter

What are the Benefits of a Good CIBIL Score for a Credit Card?

A good CIBIL score offers numerous benefits to a credit card/loan applicant. Some of the benefits are as listed below-

  • The credit card/loan applicant becomes eligible for top credit cards & related offers
  • Banks and financial institutions offer a good CIBIL score offers a higher credit utilization limit to the borrowers 
  • Banks levy lower interest rates on the loan amount for an applicant with a good CIBIL score
  • Applicants with an impressive CIBIL score get earlier approval to their credit card or loan application
  • An applicant with a good CIBIL score is given priority as compared to a person with a low CIBIL score

Credit Cards For People With Low CIBIL Score

With over 52 million credit cardholders in India, the number of defaulters automatically also increases. But what should you do if you have a low CIBIL score? Let’s understand!

A poor CIBIL score is an indication of the user’s credit repayment behaviour and casual attitude towards the acquired credit. Due to this, banks generally refrain from offering credit cards/loans to applicants with a low CIBIL score. However, there are instances like medical emergencies, loss of employment, financial damage or others that block a user’s flow of funds, and impacts the CIBIL score negatively. Thus, for such exceptional cases, banks offer secured credit cards.

Secured credit cards are ones that are provided against fixed deposits. An applicant can easily acquire a secured credit as for these credit cards, the applicant’s income proof is not necessarily required. Since these cards are offered against fixed deposits, the delayed or late payments are recovered from these deposits only. Thus, the risk associated with the non-payment of credit amount to an extent nullifies with secured credit cards. Banks, on many occasions, provide these cards to low salaried professionals too.

FAQs
How to maintain a good Credit score?
One should follow these practices in order to maintain a good credit score-
  • Always pay off your debt on time
  • Never delay any credit payment
  • Ensure not to leave any outstanding amount behind
  • Keep your credit report error-free
  • Use credit utilization ratio judiciously
  • Do not make hard inquiries within shorter time periods
  • Most importantly, figure the difference between how much you need and how much you can manage
What are the factors that affect the CIBIL score?
Listed below are a few common factors that negatively affect the CIBIL score-
  • Poor credit history
  • Numerous delayed payments
  • Maximum use of credit utilization ratio
  • Multiple hard inquiries within a given time period
  • Rejection of loan or credit card applications
  • Mismanagement between secured and unsecured loans
Can I get a credit card with a low CIBIL score?
It is a little difficult to acquire a regular credit card with a low CIBIL score; however, it is not impossible to get one. Banks levy higher interest rates on credit cards that are acquired by applicants with a low CIBIL score.
How to get 900 CIBIL scores for a credit card?
To achieve an excellent credit score, a user is required to follow a few things-
  • Timely repayment of credit amount
  • Resisting oneself from making hard inquiries
  • Using credit utilization ratio responsibly
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