We all vie for better things in life. Right from the newly launched two-wheeler to the latest I Phone to a bigger and swankier car to a lovely house, everyone is looking for something better. After all, we are living in an age of consumerism. To be able to afford all this most of us require credit/loans, at least, to fund a portion of the asset if not full. And to be able to get credit/loan we need a good credit score. A score of 750 or more assures your creditworthiness to the lenders. Thereby, you get a loan/credit on favorable terms.
Often, one may land up in situations which pulls down your credit score. The reasons could be numerous right from default in loan repayments, unpaid credit cards account etc. To be able to be eligible for credit again, it is imperative that your credit score improves.
Additional Reading: How can I Improve my Credit Score
You could also be in a situation where you do not have a credit score. This could be because you do not have a credit history yet.
In both the cases, there could be many ways of improving your credit score. They could be improving your repayments, going in for more secured loans or exploring the services of a credit improvement fintech company like us.
Among the other ways that help you improve a credit score, getting a credit card could be an option. Do we see your eyebrows going up here in disbelief? Credit cards are often called the instruments of financial destruction, as it is easy to pile up on dues and interest charges if you are not being careful. But credit cards are a good way to ramp up your credit score. Let us see how.
Credit cards can help you build your credit score. Irrespective of the kind of a credit card you go in for, the baseline is the being disciplined when it comes to repayments. Also, keep your credit card utilization ratio at 30-40% of your sanctioned credit limit. And you should see your credit score grow!
When you are faced with No credit score: Statistics say that about 50% of the loan applications are rejected due to lack of credit score. A situation of having no credit score is a tricky one. As you don’t have a credit score without credit history and without credit score there is no loans/credit. Yet you got to make a beginning somewhere and getting a credit card is a good option.
For those who have just started working or are students, getting a credit card is a good move towards financial discipline. Specially designed credit cards are now being offered by banks to those who have just joined the workforce. If you are employed in the public sector or with reputed private companies, you may be eligible for a credit card based on your salary slip. The credit limit on these cards may not be very big. Getting an add-on credit card is also a great idea to build your score as an extra card increases your credit limit, thus helping you manage better.
Additional Reading: Finding Credit Cards Based on Your Credit Score
However, what is to be firmly kept in mind is that regular repayments on these credit cards will go a long way in shaping up your credit history and building up your credit score.
The self-employed do not have it so easy. But many banks these days offer credit cards against a fixed deposit. The credit limit is often the same or little lesser than the fixed deposit. You could also opt for a prepaid credit card. When you repay the outstanding against these cards, the same is reflected on your credit history and the result is increasing credit score.
Low Credit Score: You might have ended up with a low credit card for a multitude of reasons. But getting a credit card is a good starter to build up your score. If you do not have a credit card, it is a good idea to apply for a credit card. However, if your credit score is too bad, then the only option left with you is to go in for secured credit cards, which could be against a fixed deposit or a prepaid credit card.
If you are new to credit, looking to start your credit journey with a credit card, find out the best ones that are matched to your credit profile here