Credit card usage has gone up in the last two decades in India with the introduction of digital banking. Credit card use has become a vital deciding factor in the calculation of an individual’s CIBIL score as almost everyone is availing credit facility through a credit card. Credit cards are the most convenient way of using the credit facility and if used wisely it can help greatly in improving the CIBIL score. Credit card use also helps in breaking down a huge cost into easy monthly payments making the purchase of expensive things more feasible.
Credit card and its application process
A credit card is a digital card given by the bank that you can swipe in to make payments in shops, restaurants, hotels and any other commercial places. The card is swiped on the merchant’s digital machines which are provided by the banks. The payment can be made in the period of 30 days to 45 days depending on the terms and conditions of the card. If the payment is made during the given period then the credit card holder does not has to pay any interest. If the money is paid after the given period, then an interest is payable on the due amount. It is also not good for the CIBIL score of a credit cardholder if the due date for the payment is missed by the cardholder. It will have a negative impact on the CIBIL score of the Credit Cardholder.
Applying for the credit card is fairly simple. All you need to furnish is identity proof, address proof, and income proof. Example of identity proof can be aadhaar card, passport, PAN card, driving license etc. For address proof, it can be current electricity bill, tenant’s agreement copy etc. and for income proof, it can be a salary slip or IT returns records if you are an entrepreneur. After submitting the documents, the banks check CIBIL score for credit card application.
CIBIL score
CIBIL score is the score given by CIBIL (Credit Information Bureau India Limited) to an individual. The score rates the creditworthiness of the individual based on its past records of credit taken from banks and other registered financial institutions. The data of the loan and re-payment transactions collected from the banks and the analysis mentioned in the credit report of the individual. The credit report and CIBIL score is accessible for the banks and even for the individual. The bank requests for the credit report from CIBIL to assess the creditworthiness of an individual if they have received a loan or credit card application from that particular individual. CIBIL has all the past records and transaction status of the loan accounts. It also keeps records of all the information related to credit cards the amount due, date of payment, outstanding balances, credit limit, credit utilisation ratio etc. All these go in the making of the credit report of an individual and hence the CIBIL score makes for a summary of the financial health of an individual.
CIBIL score for credit card requirement for banks
Banks do not ask for any financial security against a credit card. It is an unsecured lending that banks provide to the individuals completely on the basis of the person’s creditworthiness. To avoid running a risk of defaults banks avoids issuing credit cards to risky customers who have a bad financial re-payment record for credit in the past. A very simple way to assess whether the applicant will be capable of paying for the credit card bill is to run a check on the CIBIL score for credit card on that individual. The credit report gives a detailed record of the past and current loan accounts and repayment behaviour on which the CIBIL score is based. CIBIL score also helps the banks to find out the individual’s sincerity towards paying back the credit card bill. Additionally, the banks also get to know about the number of existing credit cards an applicant hold or the applications made for a credit card. Having a poor credit record can lead to rejection of a credit card applicant. In fact, not having any credit history can also lead to rejection of credit card applications as no data is available to prove a creditworthiness of the applicant.
How to get access to CIBIL score for Credit Card
You can easily access your Credit Information Report (CIR) to check your CIBIL score for the credit card. The CIBIL score will be mentioned in your Credit Information Report. The report can be obtained from the official website of CIBIL (Credit Information Bureau India Limited). All you need to do is select a plan on the CIBIL website. The plan has a membership fee for 1 month, 6 months and a year. The charges for the 1-month plan are INR 550, a 6-month plan is INR 800 and for a year it is INR 1200 (Prices are subject to change). Once you select the plan, you will need to make a login account on the website which you can use for easy access in future. After that, you will need to put in your details and upload documents to verify those details. Post that you will need to make the payment online and immediately you will get access to your CIR and CIBIL score.
Minimum CIBIL score for credit card
RBI has mandated all banks to check the creditworthiness of an applicant properly before issuing a credit facility. As CIBIL score is a simple and robust way of checking the creditworthiness, all banks follow it diligently. A CIBIL score is between the range of 300 and 900. Banks look for a good CIBIL score to approve a credit card applicant. A score of 700 and above is considered a good CIBIL score to get a credit card application approved. This is also conditional to other requirements of the banks that fall in the line of the credit card approval process.
Solutions to improve a low CIBIL score for credit card
Most banks refrain from issuing credit cards to those with poor credit record in the past. This is due to the chances of defaulting and delaying payments are high. However, there are times when an individual has been through bad fortune and circumstance like a medical condition, loss of job, accident, etc. which had an adverse effect on finances. For such customers, there is an option to improve and rebuild their creditworthiness through secured credit cards. Secured credit cards are offered by banks against fixed deposits as financial security. If the payment due is not made, then the amount due is debited from fixed deposit amount.
