How To Improve CIBIL Score Using Your Credit Card?

Credit cards are one of the greatest financial tools if used correctly. You can easily apply for a credit card and get approval within minutes. Credit cards can be used to purchase anything and are the perfect alternative to cash. However, if you do not use the credit card properly, you might end up in debt. Also, it is important to have a high CIBIL score to obtain a credit card. But can credit cards help in improving your CIBIL Score? Let’s find out!

Whenever you apply for a credit card, banks check your CIBIL score in order to approve your application request. If you have a low CIBIL score, then the bank might reject your application or would approve a credit card but with a lower credit limit. On the other hand, if you have a high CIBIL score, then you can easily get approval on your credit card application. Along with that, you can even get a higher credit limit approved with a higher CIBIL score. Also, you can effectively use your credit card to improve your CIBIL score. Moreover, you can use secured credit cards to improve your CIBIL score.

What are Secured Credit Cards?

Regular credit cards are an unsecured form of credit since they are offered without any collateral. However, secured credit cards, on the other hand, are offered against an asset that you can forfeit to the lender in case of non-payment. These are the best credit cards in India. Banks approve applications for secured credit cards much faster than regular credit cards. In case of non-payment, the bank would immediately liquidate your asset to recover the debts. Also, your secured credit cards can help in improving your CIBIL score much faster than any other regular credit card. Not only this, in fact, you cannot close the FD till the time you hold that secured credit card. Usually, banks cap the maximum credit limit to 85% of the FD amount. However, apart from the fixed quotient, such a type of card works just like a normal credit card, and due to this you can continue earning the interest on the FD.

Advantages of Secured Credit Cards

There are multiple advantages that come along with secured credit cards. Some of the advantages are as follows:

Improves CIBIL Score

A secured credit card helps you in building your credit credibility with the help of displaying financial discipline by reporting healthy card usage and paying bills on time. Therefore, you can make it easy for banks by increasing your CIBIL Score to approve your credit card application.

Helps in building a credit history

If you have no credit history, a bank can decide against issuing you the normal credit card. Once you use a secured credit card, it allows you to build your credit history making you eligible for normal credit after some time.

Helps in increasing your credit limit while receiving the interest on FD

If you are already having an FD with a bank, why are you not opting for a secured credit also? Yes, it will not cost you a single penny, besides the processing fee, if it is applicable. And, this way, you can easily increase your credit limit while earning the interest on a fixed deposit.

Tips To Increase CIBIL Score By Using Your Credit Card

Do Not Use Your Credit Card For Large Purchases

Credit cards offer you the option to repay the amount over a period of time which makes it suitable for people to use their credit cards for large purchases on their credit cards. However, this can have a negative impact on the credit health of the cardholder. Also, if the repayments are not made on time, then it can have a negative impact on your CIBIL score. Therefore, it is advisable to always plan your expenses beforehand and use a credit card for only making purchases that you can repay within time. Repaying your credit card bills on time while keeping a low credit card usage can help in improving your CIBIL Score.

Make Repayments A Habit

Having good repaying habits can improve your CIBIL score. Even if you cannot repay the entire due amount that you owe on your credit card, you should still make the minimum repayments on or before the scheduled due date. This represents that you don’t have a habit of defaulting on payments and can be creditworthy in the long run. However, paying off as much of your credit card debt as soon as possible can increase your CIBIL score within no time.

Conclusion

These are some of the ways by which you can improve your CIBIL score using your credit card. Also, it is important to understand that you should have a high CIBIL Score during the credit cards application process to avoid rejection. You should apply for the credit cards best in India to significantly improve your CIBIL Score. Credit card rejections can also have an impact on your credit health and can lower your CIBIL Score.

FAQ

How to Improve Your CIBIL Score Immediately?

Improving CIBIL Score takes time and there is no way you can improve your CIBIL Score immediately. You need to be patient to see the results in improving your CIBIL Score. Repaying credit card dues on time, limiting your credit utilization ratio, and keeping a check on your credit report are a few ways by which you can improve your CIBIL Score.

Does a credit card improve your CIBIL score?

Yes, a credit card is one of the best ways to improve your credit and enhance your CIBIL score. However, it entirely depends on how you manage your credit card.

How can I correct my CIBIL score immediately?

If there is an error in your credit report, then you should immediately report it to the respective credit bureau and get it corrected. Having errors in your credit report can have a negative impact on your CIBIL Score and thus on your creditworthiness.

How much should I spend on my credit card to improve my CIBIL score?

It is advisable to keep the credit utilization ratio as low as possible if you are trying to improve your CIBIL Score.

How can I get an 850 CIBIL score?

Every single EMI payment or credit card outstanding payment made on time adds to your credit score. Therefore, it is advisable to never default on your credit card repayments to achieve a CIBIL Score of 850.