Credit cards are one of the best strategies considered by a lot of experts to improve credit scores. For new loans and credit cards, applicants with higher credit scores are more likely to be accepted since they are viewed as more creditworthy by the lender. While it is possible to obtain a credit card even with bad credit or a low CIBIL score, doing so may result in higher interest rates and other costs. So, in the end, you might wonder what the minimum CIBIL score for HDFC credit card is or CIBIL score for credit card; continue to read to know this.
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What credit score is required to get a credit card?
There is no such set minimum CIBIL score for HDFC credit card or any other card for that matter. In actuality, it varies depending on the bank or financial institution you are applying to. In general, people with credit scores of 750 or even higher have a decent chance of getting approved for a CIBIL score for credit card or loan. What about those who have a CIBIL score lower than 750? They might also be accepted, but you might be subject to higher interest rates or other fees. Keep in mind that your likelihood of being refused increases as your credit score decreases. Another significant drawback of applying for a credit card with a poor CIBIL score for credit card is that every time your application is rejected, your score will drop by a few points. Reviewing your credit score is also advised before applying for a new credit card so that you have enough time to improve it and have your applications accepted.
Why do banks look at applicants’ credit scores?
Since credit cards are unsecured loans and require banks to take a higher level of risk hence, they factor in CIBIL score for credit card when accepting credit applications. That explains why it is imperative that they determine whether an application has sufficient creditworthiness to pay the bills in a timely manner or not. And what better way to assess a person’s debt repayment habits and credit limit usage than their credit score? A potential borrower person is obliged to present all required documentation when applying for a credit card. On the bank’s end, a hard inquiry is made into his credit history. The lender would learn more about the applicant’s entire repayment history, including whether s/he has ever missed a loan EMI payment and the number of active accounts, by reading the credit report. If these numbers don’t match the eligibility criteria laid down by the bank for the approval process, the application is rejected.
Got a credit card with a bad score? Here’s how to get a new credit card of your choice
Now that you have received your credit card with a bad CIBIL score for credit card, there is still a chance of obtaining the credit card you desire with better perks by establishing a positive credit history with the current credit card.
- Pay the bill before its due date: All of your card transactions are reported by credit card issuers to the bureaus for the agencies for calculating and updating credit scores. At the same time, delays and defaults in paying your dues lower credit scores and consistently paying the full amount of a bill by the due date are seen favourably and can result in a gradual rise in credit scores. Use your credit card only for expenses that you can pay off in whole by the due date. If the balance on your card is too high to be paid off by the due date, consider converting it (in part or in full) into EMIs.
- Maintain a credit utilisation ratio of no more than 30%: This proportion represents how much of your overall credit limit you have used. Lenders typically favour borrowers with credit utilisation ratios under 30% when approving loan applications. Higher credit utilisation ratios are viewed as credit-hungry applicants who are, therefore, riskier to lend to. When a person’s ratio exceeds the 30% threshold, credit bureaus downgrade their credit score, while individuals with lower ratios receive higher scores. Therefore, constantly try to keep your credit utilisation percentage under 30%. If your credit usage ratio regularly exceeds 30%, ask your current card issuer(s) for a credit limit increase.
- Steer clear of submitting several credit card applications: Multiple card applications registered in a short period of time will reduce your credit score slightly. Card issuers pull your credit record from the agencies whenever you apply for a credit card so they can assess your creditworthiness. This is regarded as a hard inquiry and is recorded in your credit report, each of which lowers your score slightly. Visit an online financial marketplace to examine different credit card offerings rather than submitting direct applications to numerous card issuers. Even though they would also fetch your credit score, such requests are considered soft enquiries and hence do not impact your credit score.
- Carefully close your previous credit card: When determining your credit score, credit bureaus take into account the average age of all of your credit facilities, including your loans and credit cards. The average length of your credit facilities will therefore be shortened by closing your older credit card(s), which will cause creditors to lower your credit score. In addition, cancelling your credit card may result in a reduction in your overall credit limit. Your credit score can be affected if a decreased credit limit causes your credit utilisation ratio to surpass 30%. Ask other credit card issuers to raise their credit limits to lessen the impact that credit card closures will have on your eligibility for a CIBIL score for HDFC credit card.
Conclusion
As long as you pay off any remaining balance in full, credit cards do not charge interest fees, in contrast to loans. Credit cards provide zero-cost financing in addition to rewards points, cashback, discounts, and other perks. These advantages can vastly outweigh their cost if properly planned and implemented. Credit cards are frequently held responsible for bad credit and becoming caught in a debt cycle. This is far from reality, though, since a lack of financial discipline and restraint leads to low credit scores and a debt cycle. In fact, a smart credit card choice can help you raise your credit score and meet the minimum CIBIL score for HDFC credit card.