Credit scores are a major factor in determining whether an applicant is approved for a credit card or a loan. They are also being used more frequently to secure favourable interest rates on loans.
Thus, a high IIFL CIBIL score is now a significant asset in the modern economy. But credit ratings can’t be developed without access to credit in the first place. Taking out loans for the sole purpose of building a credit score is not a good idea because doing so requires you to pay back the loan plus interest. Therefore, credit cards are certainly a cost-effective way to build a credit history, as they are simple to obtain and don’t carry any mandatory interest unless payback irregularities are done. Let’s dwell in and get a firm grasp on this so that the next time you do a credit check online, you come out on top.
What Exactly Are Credit Cards Used For?
Using a credit card for payments is the same as getting a loan. The credit card company is the one who actually pays the bill when you use your card to make a purchase. It is possible to get a credit card refund at the time of payment. For this reason, your credit card purchases will show up on your credit report and be factored into your credit score because they are considered a credit item. When checking your credit report or HDFC CIBIL score online, you will find this.
Credit card bills, in contrast to loans, accrue no interest if paid in full before the due date. While it’s true that some credit card companies levy annual or reactivation fees, you can reduce the amount you pay by making smart use of your card’s perks, such as its interest-free grace period, reward point system, cash-back and discount opportunities, and annual fee waiver.
Start your credit adventure by applying for a credit card at your existing bank; many credit card providers offer cards to persons with no credit history. Online financial portals are organised to assist you get cards as per their qualifying requirements, so you can find additional credit card options there. You should pick the one that most closely fits your usual buying habits.
Also, if you find out that you’re IIFL CIBIL score is below zero after applying for a credit card that requires a HDFC CIBIL score, you may want to apply for a secured credit card instead.
Credit limits on these cards are often capped at 90% of the value of the FD for which they are issued. Lien flagging prevents you from liquidating these FDs until you cancel your credit card. Your FDs may be subject to liquidation by the issuing bank if you fail to make timely credit card payments. Therefore, banks do not use conventional qualifying criteria like credit score, income, or employment history when issuing secured credit cards because they view the product as risk-free.
Secured credit cards function similarly to unsecured credit cards; the only difference is that FDs can be used as collateral instead of cash. In the same way that regular credit card purchases are reported to the credit bureaus and factored into your IIFL CIBIL score, so too are secured credit card purchases. Secured credit cards also come with a number of extra perks that regular credit cards don’t, such as a 0% intro interest rate period, cash-back offers, meal discounts, a fuel surcharge waiver, reward points, EMI conversion, free movie tickets, and more. It’s important to note that checking your credit score online is quick and simple.
If you follow these actions after getting your credit card, you should be able to see an increase in your HDFC CIBIL score the next time you check it online, a few months later.
Do your best to always pay your bill payments on time
Credit is more attractive to borrowers who have a history of paying back loans and other debts on time. It is commonly believed that debt repayment history is given the most weight by credit agencies when determining credit ratings. If credit card payments are missed or made late, it will show up on your credit record and lower your credit score. In addition, late payments on loans and credit card bills can hurt your credit for up to five years after the incident and make future credit more difficult to come by. When you check your credit score online, you can see the positive effects of a methodical approach to bill payment on your credit report and the gradual rise in your IIFL CIBIL scorethat results.
You shouldn’t use more than 30–40% of your available credit at any given time.
An essential indicator known as CUR can be seen in your credit report.
Use of Credit Limit as a Percentage of Available Credit. To illustrate, if your credit limit is Rs 80,000 and you have made purchases of Rs 16,000, your credit utilisation percentage is 20%. Credit bureaus will reduce your score if your credit use ratio is above 30–40 percent, as this is the range that lenders prefer to lend to. If you frequently charge more than you can afford, you should talk to your card issuer about getting a higher limit or an additional card.
To avoid direct loan and credit card lender contact, avoid contacting lenders directly.
Lenders do “hard inquiries,” often known as a credit score check online, as soon as they receive your credit application. A hard inquiry will result in an update to your credit report and a temporary reduction in your HDFC CIBIL score. You should check out online financial portals/websites/apps instead, where you may compare several credit card and loan options side by side. In addition, these marketplaces may request your credit report from multiple credit bureaus; however, these inquiries are considered “soft” and do not affect your IIFL CIBIL score in any way.