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Wednesday, May 31, 2023

Have Zero Cibil Scores? Here’s How to Build It Smartly

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No one wants a minimum cibil score, which is the zero credit score. Right? After all, a good credit score has grown in importance as a financial asset in today’s world. Not only does it increase your chances of getting approved for a loan. But it also makes you eligible for cheaper interest rates on loans as well as. For better credit cards in the future. 

However, in order to create a credit score and improve it from the minimum cibil score mark, you must take advantage of some type of credit facilities, such as a loan or a credit card. But because loans are required to have interest charges attached to them, the most cost-effective way to establish a credit history and progressively raise your credit score to the level of maximum cibil score is to use credit cards: 

Why should you use credit cards to establish a credit history?

Making payments with credit cards is believed to be equal to taking out loans because the card issuer pays on your behalf. You give the money back to them by paying your credit card bills on time each and every month. When you use your credit card, the credit card issuer reports your purchases to the credit agencies. Which then include them in your credit report and use them to calculate your credit score a result. In contrast to loans, credit cards do not charge interest. If their payments are paid in full on the due date on the credit card statement.

Even if credit card issuers charge joining and renewal fees. These can be offset by carefully managing your credit card transactions in accordance with the interest-free period. The reward point structures, cashback, discounts, annual fee waiver on threshold spend, and other factors that are available to you.

Consider applying for a credit card through your current bank. For many lenders will issue credit cards to people who do not have a previous credit history. You can also use online financial portals to evaluate and contrast different credit card possibilities based on your qualifying criteria. Make certain that you select the credit card that best matches your transactional pattern.

What happens if you are unable to obtain a regular credit card? 

Secured credit cards are a good option.

For a variety of reasons, including insufficient income or residing in an unsuitable location, your application for a normal credit card may be denied. To avoid falling into this situation. It would be smart to apply for a secured credit card in order to establish a credit history. In most cases. These cards are issued in exchange for fixed deposits (FD). The credit limits ranging up to 85 percent of the whole value of the deposit. If you fail to make your monthly payments on your secured credit card. The issuing bank may liquidate your FD in order to recoup the outstanding debt. As a result, secured credit cards are a risk-free product for credit card issuers, allowing them to process secured credit card applications without taking into consideration the regular qualifying criteria, such as income, minimum cibil score, and employment profile, that are often considered.

Secured credit cards are very identical to their ordinary counterparts. The exception of the fact that they are secured by a fixed deposit. Their transactions are reported to the credit bureaus and used in the computation of your maximum cibil score, and other credit card benefits such as interest-free periods, cashback offers, reward points, dining discounts, EMI conversion facility, and other features are also available with secured credit cards, such as interest-free periods, cashback offers, reward points, dining discounts, and EMI conversion facility, among others. Cash withdrawal limits of 100 percent of the initial deposit are normally provided on secured credit cards as an additional benefit.

Make sure that, once you have been issued your credit card (whether ordinary or secured), you continue to practise the following practices to help you build a solid credit score and improve it from the initial level of minimum cibil score:

Pay all of your bills on time and in full–

Adopting a systematic approach to the payback of your credit card bills contributes to the development of a maximum cibil score. When determining your credit score; redit bureaus are also usually thought to put the greatest weight on your debt payback history. Furthermore, if your loan and credit card bill repayments remain on your credit report for a period of three years or longer. Your loan eligibility may be reduced for an extended period of time during that time. On the other hand, routinely making on-time payments on your credit card account will reflect well on your credit report and will help you to steadily improve your credit score gradually to the level of a maximum cibil score of 900.

Try to keep your credit usage ratio up to 30% and 40% —

This ratio measures the percentage of your entire credit card limit that is being used by you each month. In addition, because lenders may regard a credit usage ratio of more than 30-40 percent to be a sign of credit lustiness; Credit bureaus may lower your credit score if you exceed this threshold. 

Refrain from sending direct inquiries to lenders–

When you submit a loan or credit card application directly to a lender. They will pull your credit report from the credit bureaus in order to determine your creditworthiness. In lieu of completing multiple direct credit inquiries to lenders, try visiting online financial marketplaces to evaluate. A variety of prospective lenders, credit card and loan products. Despite the fact that such markets also seek your credit report from credit agencies, such requests are categorised as soft inquiries, which, in contrast to hard inquiries, do not have a negative impact on your credit score and prevent it from reaching the maximum cibil score level.

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