- HOW IT WORKS?
- Credit Score & Report
- Credit Bureaus
Credit cards can turn out to be a person’s big asset if used in the right way. They keep you aside from the troubles of borrowing. Credit cards not only help you improve your financial planning but also your credit rating. The large range of services offered by credit cards is a great way to revive your credit score.
Applying for a credit card is a simple process. Banks approve a credit card application quick if the applicant meets the criteria. The two documents necessary to apply are identity proof and a PAN card. Documents like passport, UID, voter’s ID or the Aadhaar card can be furnished as identity proof.
Details on CIBIL Score
CIBIL score is a kind of rating to keep a tab on your credit ranking. Credit Information Bureau Limited (CIBIL) is a depository of all credit information. A person’s credit related activity with banks and other institutions is collected and stored by the CIBIL.
All information about credit is provided as credit reports to the CIBIL by lenders. From the CIBIL, this information is passed on to the other lenders when requested. Lenders will need that information to test your credit worthiness.
CIBIL maintains the following records related to your financial history:
- Status of the loans borrowed
- Type of loans availed
- Record of your credit cards in the past and the present
- Credit transactions with your card
- History of repayments of the loan
- Outstanding balances
CIBIL also has access to your information such as date of birth, address, phone number, etc. along with details on your identity documents.
The Necessity to Check Credit Score before Delivering Credit Cards
Credit cards are a means of lending without asking for security. Almost all the banks in India issue credit cards to their customers purely based on the creditworthiness of the customer. Granting credit cards come with the risk of default payments that lead to a loss. To overcome these banks check the history of their credit card applicants.
By checking a prospective customer’s credit history, banks determine if he/she is capable of paying a credit card. CIBIL provides credit information and credit scores of people to the lenders when requested.
The other information provided by CIBIL includes
- information on defaults in the past, if any
- History of late payments.
- The number of loans and credit cards in a person’s name- in the past and the present.
- The number of times a person has applied for loans or credit cards.
With all this information, banks check your credibility and assess your capability in paying back to the bank.
Checking Credit History
Obtaining a Credit Information Report (CIR) can help you understand your current credit score. This report is available on the CIBIL website.
HSBC Credit Card- Eligibility and other Information
HSBC provides a few kinds of credit cards. The eligibility criteria for each card include age limit and a fixed annual income. The minimum annual income varies for each category of the card. While one or two categories of credit cards require the customer to have an HDFC bank account, the others do not require that.
CIBIL scores the borrower anywhere between 300 to 900 points. A score above 700/750 is considered good. Most banks follow similar criteria for awarding loans and credit cards. Thus if you know the criteria of one bank, it may apply to most of the banks in the country
Like with every other credit card, there is no fixed CIBIL score that is required to apply for an HSBC credit card. However, it is essential to maintain a credit score of 700 or 750 and above to ensure consideration of your application. A low score leads to rejection of the application. A single rejection causes the credit score to drop further.
With a score of 750 and above the customer can rest assured that his credit card application will get approved quickly; if he meets the other eligibility criteria. A good score assures the bank of your financial stability.
How to cultivate a good Credit Score?
1. To protect your credit score, it is important to first establish a credit record. If you are applying for a credit card for the first time, it is advantageous to apply with a bank that you have a good relationship with. If there is none, approach the banks with which your employer shares an understanding or pact. This will improve your prospects of getting a credit card.
2. If you already have a credit record and you are applying for an additional credit card, it is necessary to check your credit score. Rejections bring down your score. If by chance your application gets rejected, plan your subsequent application in the right manner.
3. Do not apply to another bank immediately after rejection from a bank. Consecutive rejections in short intervals will affect your credit score drastically.
4. The most important strategy is to pay the credit card bills on time. This does not mean paying only the minimum dues. It is essential to pay the entire outstanding dues. When an outstanding balance is not dismissed, it is considered as an overdue, and it will reflect in the credit report.
Spending more than three-fourths of the credit limit or the entire limit is not wise. This will affect your credit score in a negative way. For an optimal balance of your credit rating, one should ensure that the credit utilisation is neither too low nor too high.
At Creditseva, we will help you make the right decisions regarding your finances. Our suggestions will help you improve your creditworthiness, and you can become suitable for fresh loans and credit cards from banks.
Credit Cards for Low Credit Ratings
Banks do not encourage issuing credit cards for those with low credit scores due to the risks attached like delay in paying the dues and payment defaults. However, a few defaulters have a genuine reason behind missed payment like medical emergencies, loss in the family, that lead to short-term financial difficulties.
To help such people to get rid of their negative credit scores, banks offer credit cards that are secure. These credit cards are offered for a fixed deposit amount in the bank. In such cases, the missed payments are recovered from the deposit by the bank. However timely payment of credit card dues over a period can help the borrowers correct their undervalued credit histories.
Clauses governing the cards issued for people with low credit ratings
Some banks do issue credit cards for borrowers with a credit score less than 750. However, apart from the long authorization process, there are other conditions that come with it:
- Low credit limit
- High interest on the credit card balance
Therefore, though the cards may be approved, the clauses governing the usage of the card are not inviting. With an improved score, a borrower can avail better terms while applying for a card and also save money with lesser interest on payment.
Dealing with Repeated Rejections of the Credit Card Applications
If your credit card applications are getting rejected frequently, the prime reason could be a low credit score. However, the rejections can be rectified by the following ways.
1. Rectify Errors:
Identify the grave errors that have led to the low credit ranking and fix them. A small change in your financial lifestyle can bring about a large change in your credit ranking.
2. Try negotiating a raise:
Ask your banker for a raise in your credit limit. A high credit limit can lead to a high utilisation score.
3. Try getting different types of credit:
Having different kinds of credit can ease the burden out of the borrower. Opting for EMI payments on the credit card dues will improve your credit scores
4. Split Payments:
Splitting the credit payments and opting to pay twice a month instead of once can be beneficial. The lower the credit usage, the higher the credit score. Having many credit cards and maintaining a low balance on all of them can help improve your score.
HSBC or any other bank does not recommend a fixed credit score to apply for their credit cards. A good credit score of more than 750 can make you a favourable candidate for the approval of not just credit cards, but also loans.
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