Credit cards are life savers. Not only do you get attractive rewards, cash back, and air miles on your cards, they also provide instant credit with an interest-free period.
Credit cards are life savers. Not only do you get attractive rewards, cash back, and air miles on your cards, they also provide instant credit with an interest-free period. But for some people, it may be a challenge getting a card. The reasons could be many —they have a poor credit score, they don’t have a credit score, their income isn’t sufficient, and so on. Let’s look at what are the ways you can get your credit card without difficulty.
Get card against fixed deposit
Several leading banks today offer credit cards against fixed deposits you hold with them. The fixed deposit needs to be above `20,000, and the credit limit is set at 80-85% of the deposit. This product is ideal for people with no or low credit scores who may otherwise not be able to get a credit card. The deposit is held by the bank as security for the amount spent on the credit card. The security notwithstanding, the credit card offered against deposits have the typical rewards and benefits of other credit cards.
Start with a no-frills card
If this credit card is going to be your first credit product, start off with a no-frills, basic card with no annual fees, low spending limit and suitable for your current income level. Don’t aim for the premium or super premium cards which have a much higher eligibility and may even have hefty annual fees. Use your first card judiciously and create a healthy credit history. In time, you will become eligible for the premium cards with better features and higher spending limits.
Check your credit score
Always know your credit score before you apply for any credit product, be it a card or a loan. Knowing your score beforehand would alert you to the possibility of a rejection. Just Google for “free credit report” and get your report instantly. This is a personal inquiry into your own credit history. These are termed “soft queries” and do not harm your score. You can make as many such checks as you want every year.
Improve credit score
Often, credit applications are rejected when the applicant’s credit score is low. The biggest reason for the low score is having a poor repayment record. It could also be due to errors in the credit history. In either case, you must take charge. To improve your credit history, repay your dues on time and in full. If you have pending card balances, settle them immediately. If there are errors in your report, work with your lender and credit rating agency to get them rectified.
Don’t make too many applications
Every time you apply for a new loan or credit card, the lending institution initiates a check into your credit history. These are “hard queries”. Each such query initiated by a lender lowers your credit score a little bit. Several card applications can therefore bring down your score significantly, leaving you ineligible for most cards or loans. It would be wiser to check your score for free beforehand, shortlisting the cards you’re eligible for, and applying only for them.
Try the local bank
If you are struggling to get a card elsewhere, try the bank where you and your family have held accounts for many years. Based on the long-term relationship, you may be able to get at least a basic level credit card, which would help you initiate a credit history for yourself.
The writer is CEO, BankBazaar.com