October 2, 2024 · 14 mins read
Santosh Kumar
A Credit Card is a convenient method of accessing funds at the swipe of a card. It allows you to borrow certain amounts to purchase goods, pay for services, or make emergency cash withdrawals. In today's time, a credit card has become a very popular way of financing your expenses through a system of borrowing. Due to its convenience and accessibility, many people want to obtain a credit card in their own name. However, a certain eligibility criterion is set for acquiring a credit card. The first step in acquiring a credit card is to analyse your credit score.
Ideally, any applicant who wants a credit card is expected to have a good credit score, and a good score range is 750-900. However, many banks and non-banking organisations accept invitations from people with low credit scores. With an increasing demand for credit cards, multiple options can be explored when it comes to credit cards. However, such applicants need to be verified on the basis of age, income, address, credit history, and liabilities. A credit card is not approved or rejected based on one aspect of an individual's information. Many factors influence approval when it comes to credit cards. You can read about the factors in the next section-
Issuers like banks often assess your employment and income status to measure your ability to repay debt. The higher and more stable your income, the better your chances of acquiring a credit card. Having a stable professional history or a stable source of income will reflect on your approval for a credit card.
This aspect calculates your monthly debt payments to your income. The lower the ratio, the better your chances of being approved for a credit card. It also shows your debt management ability.
Frequent and excessive credit inquiries will be taken as a sign of financial instability and distress. This will reflect poorly on your credit profile and minimise your chances of getting approved for a credit card.
This will include your financial data, such as your history of loans, debts and repayment, existing debts and payment cycle, and the number and types of credit cards, if any. Financial history is a very important aspect that influences your credit card approval. Usually, people with questionable financial management skills and risky borrowers have a slim chance of being approved for credit cards as they are a risk to banks and non-banking institutions that issue credit cards.
Read More:: RBI Guidelines for Credit Cards
A credit score is considered to be the first box that needs to be ticked when it comes to applying for a credit card. Why is a credit score so important, and what is its significance when it comes to approval for a credit card? A credit score is a grade you get that defines your financial portfolio. It shows how reliable you are as a borrower and your credibility when it comes to debt, loan and repayment. That is why a credit score is the first thing that credit card issuers consider when an application for a credit card comes through. This means that having a low credit score would minimise your chances of getting a credit card while securing a high score would automatically translate to better chances. Your credit score also governs the type of credit card that you may be approved for.
Read More:: What is the best CIBIL Score
While it is true that there is no fixed minimum when it comes to applying for a credit card, however, one should remember that there are certain brackets that would translate to a certain type of card being accessible to individuals whose credit score factors in certain ranges. These are the credit card types and options that may be offered to you based on your credit score; of course, these are just commonly followed norms and do not come as rules. There can be exceptions depending on a person's detailed financial information acquired at the time of application and assessment.
Individuals with a credit score of none to 300 can acquire these cards. To obtain such a credit card, one has to deposit a fixed amount of money as collateral. This deposit also dictates your credit limit. Such cards are suitable for people who have very low credit reliability and are a perfect way to build your credit profile. These cards are for individuals with a minimum credit score and a fixed deposit collateral, which is the only way for them to acquire a credit card and start building a positive credit profile.
This type of card typically can be issued to individuals with a credit score between 500 and 620. It is perfect for people who have a poor credit report but do not need to deposit collateral. However, it often comes with a higher interest rate and fees.
These types of cards are generally for people whose credit scores range between 620 and 680. They come with comparatively better perks and rates of interest. They also have lower fees and higher credit limits, which make them perfect for people whose credit scores range in the fair tier. These cards are perfect for people who wish to slowly strengthen their credit score by managing their debt and borrowing credibility.
Such cards come with offers, cashback, rewards, and discounts on selected merchants and services. These cards are issued to individuals with a credit score between 680 and 750. Users can enjoy many benefits, and usage is rewarded with added benefits and privileges. They also come with a higher credit limit.
With a credit score of 750 and above, you can acquire a credit card with an extensive range of benefits, lower interest rates, lower fees and a higher spending limit. Some of the perks include lounge access, travel points, card-specific discounts and a reward system. These types of cards are exclusively approved for individuals who are considered to be creditworthy and financially responsible with a strong credit score.
Read More:: Credit Card Against Fixed Deposit
Always remember that acquiring a credit card will significantly impact your finances, which can be both negative and positive. You have the convenience of access to immediate funds, but you also run a risk of debt accumulation. Here are some things to keep in mind –
1. Always check your credit score and financial standing before committing to a credit card. It is always advised to know your personal financial standing before you obtain a credit card because a credit card will definitely impact your credit portfolio in the future.
2. Research multiple options and explore the market for the credit card that best suits your needs and requirements. Always go for a card that best complements your spending habits, whether you are into online shopping, travelling, or using it for business purposes. Knowing your card options and what they offer should always be a priority as a cardholder.
3. Always read the terms and conditions in detail before obtaining a credit card. Know your fees, interest rates, perks, privileges, and limitations as a user.
4. Know your credit limit and try to keep your utilisation below 30% of your limit to maintain a healthy credit score. This shows financial responsibility and credibility as a borrower to lenders.
5. Always monitor your transactions, bills, and fees closely. Look for irregular and unauthorised transactions and report them to your bank as soon as possible. Being responsible as a user will help you in the long run.
6. Even after acquiring a credit card, do not neglect to pay the bills on time. Always stick to your payment cycle by tracking your expenses and your credit statements.
7. Avoid cash transactions through your credit card, as they can charge a high fee. Also, be clear on the annual fees, maintenance fees, and any other fees that may be levied on you.
Your credit score plays a crucial role in the approval process for a credit card; the three-digit credit score can influence the process, approval, and type of card that will be allotted to you. A credit score is generally calculated through a variety of parameters like payment history, credit utilisation ratio, length of credit account, types of credit in your name, and inquiries made for new credit. But, contrary to popular belief, it is possible to acquire a credit card with a lowest credit score for credit card as well. Credit cards were initially only approved based on your creditworthiness. That criteria is still followed rigorously, but now, there are options available that have made credit cards accessible to people with minimum credit score for credit card as well. Acquiring a credit card with a minimum score will definitely help an individual gain some financial flexibility and confidence to make critical financial decisions. This will also help them rotate their expenses through borrowing and slowly build a good credit report. To answer a question that is asked by many- Is it possible to get a credit card with a low score? Yes, it is possible. However, the minimum score is debatable because no minimum score has been laid down either by borrowers or the financial authority that dictates such policies. So, a score of 300 is generally considered to be minimum by most.
Read More:: Minimum CIBIL Score Required for Credit Cards
A credit score indicates your creditworthiness — essentially, how likely you are to repay borrowed money in a timely fashion. It will typically range from 300 to 900 points, and having a score higher than 750 is considered good/superior. There are many factors that go into a score being higher or lower:
Repayment History: Payment of your monthly credit card bills and EMI on time is the most critical factor. Even one `missed' payment can lower your score.
Credit Utilization Ratio: You will appear to `credit hungry' and your score will go down if you go over the 30% ratio against your available limit.
Length of Credit History: The longer you have had credit, which is better. It is perceived by lenders as established trustworthiness with repayment and lower default risk/suspect.
Type of Credit: Being a mix between secured loans (home or car loans) and on- secured credit (credit cards), this can help balance your report.
New Credit Enquires: If you are curious about being declined for multiple loans or card applications in a short period, remember that each enquiry will be noted in credit history.
India has four main credit bureaus: CIBIL (TransUnion CIBIL), Experian, Equifax and CRIF High Mark. Even though each bureau uses a slightly different process, they all essentially rely on the same key drivers, the primary ones being payment history, utilization ratio and total credit account.
1: Payment history (35%) - Record of timely, and late payments.
2: Utilization ratio (30%) - Ratio of total credit limit to total utilization.
3: Length of credit history (15%) - A credit report with old accounts will improve your profile.
4: New credit (10%) - Too many new credit applications will drop your score.
5: Credit mix (10%) - It is best to have both secured and unsecured credit.
Lenders report your credit information to the credit bureaus on a monthly basis. Once the bureaus receive this information, they analyze the over all data and assign you a score that ranges between 300-900.
Regularly checking your credit score allows you to keep an eye on financial vitality and identify errors in a timely manner. Here's how to check your credit score:
1: Go to the website of a credit bureau like CIBIL, Experian, Equifax, or CRIF High Mark.
2: Hit the button that says "Get Your Credit Score" or anything similar.
3: Enter your information - your name, date of birth, PAN, and contact information.
4: You will verify your identity with a one-time password (OTP) that is sent to your registered number/e-mail.
5: You will now see or download your credit report.
Under RBI rules/regulations, you can get one report free every year from each credit bureau.
Missing due dates: You're likely to feel the long term negative effects of these late payments.
Using up your limit: It is best to keep your overall card usage between 30-40% of your overall limit.
Frequent applications: Shopping around, or making multiple applications for loans or cards can cause all of your applications to be declined and actually drop your score.
Closing old accounts: The older your cards are, the better they will be for your credit history length.
Ignoring errors: You should dispute any errors you find on your credit history as soon as possible.
While a credit score of 750 is considered to be ideal for issuing a credit card, it is possible to get a credit card with a lesser credit score. This case has no fixed minimums, but the general consensus is that 0-300 is the lowest minimum in the credit score range. The approval process may be lengthier for such people, but it is not impossible. Banks and non-banking financial organisations issue credit cards to people whose credit score is minimal. Having a lowest credit score for credit card will certainly not put a stop to your dream of having a credit card; of course, it will come with some challenges, but it can be done.
Yes, it is possible to acquire a credit card with a credit score of 350. There are secured credit cards available for people who have a lower score, which are available against a collateral deposit.
When assessing a person for a credit card, the main criteria banks look for are creditworthiness, responsible management of finances and debt, and employment and income status.
There is no such minimum score defined, but Individuals with a credit score of 300 and above can apply for a credit card, and they will be approved based on their financial status and eligibility in terms of the respective bank's protocol.
A credit score of 750 and above is likely to help you acquire a premium credit card with the most benefits.
Yes, you can apply and get approved for a credit card without a credit score, but that will be a credit card against collateral and will have limited usage and perks.
Wait 6 to 12 months of consistent, on-time payments to strengthen your credit profile and demonstrate responsibility.
Yes it does. Closing a credit card reduces the total limit on your credit, and may shorten the length of history, thus slightly reducing your overall score.
2 to 3 hard inquiries in one year is a generally acceptable standard. More inquiries are often a red flag of yourself having financial stress.
Yes it is. Secured cards, for example, are usually available for people with scores lower than 650, while regular cards may have minimums in the 700s, and premium cards often require scores in the 750s or higher.
Build and Maintain a 750+ Credit Score
