When applying for any type of loan or credit card, credit scores are taken into account. They are also being used more and more often to fix loan interest rates.
Consequently, having a high credit score has turned into a profitable financial characteristic. But using a credit facility is necessary to build credit scores. Applying for loans to build credit is a bad idea because doing so will subject you to the applicable interest rates. Because they are straightforward to obtain and don’t impose a mandatory interest rate until repayment irregularities are resolved, credit cards are the most affordable way to build a credit history.
So let’s deep dive in and explain this so that you can get a good transunion CIBIL score the next time you do check CIBIL score online.
What function do credit cards serve?
Using a credit card to make a purchase is the same as borrowing money. When using a credit card to make a purchase, the transaction is handled by the credit card company. You’ll get reimbursed for your expenses after paying your credit card bill. Because they are regarded as credit items, credit card transactions are reported to the credit bureaus, where they are added to your credit report and used to determine your credit score. When you perform check free CIBIL score online, you can see it in your credit history.
If a credit card bill is fully paid by the due date, unlike loans, no interest is charged. You can reduce the joining and renewal fees that credit card issuers may charge by carefully managing your credit card usage in accordance with the interest-free period, reward point programmes, cashback and discount policies, annual fee waiver, and other factors.
You should start your credit journey by applying for a credit card through your current bank because many credit card issuers offer credit cards to people without a credit history. Visit online financial portals to find more credit card choices. These websites are made to help you apply for cards in accordance with their requirements. Select the alternative that most closely matches your usual transactional pattern.
Consider getting a secured credit card to establish history if you can’t get a regular credit card because your credit score is zero, as you discovered after doing check CIBIL score online.
These cards frequently have credit limits that are 90% of the amount of the fixed deposits (FDs) for which they were issued. Because these FDs have liens flagged on them, you can’t close them until you stop using your credit card. If you don’t make your payments on time, the bank that issued your credit card may be able to sell your FDs to pay off the debt. Because banks view secured credit cards as a risk-free product and do not demand them, they do not consider conventional eligibility criteria like transunion CIBIL score, income, and employment history.
Regular credit cards and secured credit cards are similar, with the exception that the latter can be used to secure financial instruments as collateral. Secured credit card transactions are tracked by credit bureaus in the same way as unsecured ones and factor into the calculation of your credit score. When using secured credit cards, you can take advantage of a number of additional benefits, such as an interest-free period, the elimination of fuel surcharges, cash-back offers, reward points, meal discounts, cost-free movie tickets, EMI conversion, and more. You can quickly check CIBIL score online, so keep that in mind.
After receiving your credit card, adhere to these recommendations to steadily raise your credit score.
Make sure to regularly and on time pay your bills.
Lenders prefer to work with clients who consistently settle their debts and make their payments on time. It is widely acknowledged that the primary factor used by credit bureaus to calculate credit scores is past debt repayment behaviour. It will appear on the credit report and consequently lower credit scores if there is a delay or default in paying credit card bills. Loan and credit card repayments also stay on your credit report for three to five years or longer, which may negatively affect your loan eligibility in the long run. However, if you pay your bills consistently, it will appear favourably on your credit report and help you gradually raise your transunion CIBIL score over time, which can be seen when you perform an online credit score check.
Assure that it is between 30 and 40% for your credit utilisation ratio.
You’ll notice a crucial factor called CUR when reviewing your credit report and doing check CIBIL score online.
This percentage shows how much of your credit card limit has already been used. Your credit utilisation ratio is 20% if your total credit limit is Rs. 80000 and you have used your credit card for purchases totaling Rs. If your credit use ratio exceeds this limit, credit bureaus will lower your credit score because lenders prefer to lend to borrowers with credit utilisation ratios of up to 30 to 40%. If you frequently exceed your credit limit, get in touch with the business that issued your card to ask for a higher credit limit or more credit cards.
Avoid contacting lenders about credit card and direct loan inquiries.
As soon as a lender receives your credit application, it will start performing “hard inquiries,” also known as credit checks using CIBIL check online. In the event of a hard inquiry, your credit report will be updated, resulting in a small decline in your transunion CIBIL score. Research different credit card and loan options on online lending and card marketplaces instead, then choose. Despite the fact that these markets also request copies of your credit reports from various credit bureaus, these inquiries are referred to as “soft inquiries” and have no bearing whatsoever on your credit score. Do not forget that you can regularly check your CIBIL score online.