A credit card is a great tool for building or rebuilding your credit score. It is one of the first things a person fresh out of college procures. The added benefits like complimentary movie ticket, cashback or reward points on shopping and fuel surcharge waivers to name a few make credit cards very desirable.
The same cannot be said in the case of people with bad credit score as their requirement for credit card is for them to improve their credit score. Secured credit cards are a great way to improve or rebuild a credit score.
In this article we are going to look at how to choose credit cards based on credit score and how it will help build or rebuild a credit score.
Checking credit cards without affecting your credit score
Before a person chooses a credit card one needs to check their credit score. This is because your credit score is the first check a bank does when it comes to approving your credit card application. This will become a much serious issue in the case of individuals with bad credit score as each credit check will affect the credit score of the individual.
To make sure a person gets their credit card application approved they need to check eligibility. Most card issuers nowadays provide the facility of eligibility check which an individual can use to see if their eligible for the card they are interested in. Here the bank only does a soft pull of the credit score of the individual in which case their credit score does not not get affected. This way you will know if you are eligible for that card and keep your credit score safe.
Products to choose
Credit Cards that Help You Make Credit History
In this case, people do not have a credit score as they are new to the workforce and have never taken any credit in the form of loan or credit card. It is for these people that many banks provide starter credit cards to help build their score. These cards will help to build your credit profile and make you eligible for the better cards and loan products.
Credit Cards that help rebuild credit
Here banks will not be interested to provide unsecured credit cards. One of the best options could be secured credit cards. A secured credit card is one where the card applicant will provide collateral in the form of fixed deposit which will act as the credit limit of the card. The limit will vary from bank to bank but normally it will be 60% to 70% of the collateral.
For example, consider you opt for a credit card and provide the issuer bank with a collateral of Rs.1,00,000 in the form of a fixed deposit. The bank will allocate the credit limit at 60% to 70% of the fixed deposit i.e. Rs.60000 to Rs.70000.
Secured credit cards have the same benefits available with unsecured credit cards with an added advantage of earning interest from the fixed deposit you have invested, while boosting your credit profile. All this makes a secured credit card an option for those who have past issues and are in the process of resolving them.