The use of credit cards has become increasingly prevalent in India, with millions of citizens relying on them for their everyday purchases. However, obtaining a credit card with a low credit score can be challenging. In this blog, we will delve into the various types of credit cards available for individuals with low credit scores and discuss how Shriram Finance can provide solutions to address their financial needs.
Credit cards are typically issued by banks based on an evaluation of the applicant's risk profile and credit history. The credit score plays a significant role in determining eligibility and the sanctioned credit limit. While most banks prefer providing credit cards to individuals with good or high credit scores. There are still options available for those who want to avail of credit cards with low credit scores. It's not a lengthy process, you can avail easy approval credit cards from banks by filling out a few details.
We will explore these options, including applying for a credit card with your primary bank, obtaining a secured credit card against collateral, or opting for higher fee unsecured credit cards. Additionally, we will discuss the importance of improving your credit score and provide actionable steps to achieve this goal.
At Shriram Finance, we understand the challenges faced by individuals with low credit scores. That's why we offer various financial solutions such as commercial vehicle loans, two-wheeler loans, car loans, home loans, gold loans, personal loans, small business loans, fixed deposits, and recurring deposits. By taking proactive steps towards improving your financial standing today, you can pave the way for better opportunities tomorrow. Apply for a commercial vehicle loan today.
Types of Credit Cards
There are different types of credit cards for low credit score individuals. These credit cards cater to specific needs and offer various benefits. Let's explore the options:
1. Secured Credit Card
A secured credit card is an excellent option for individuals with bad credit scores. This type of credit card requires collateral or a pledged asset, providing assurance to the issuing authority and reducing the risk associated with lending to someone with poor credit. Typically, secured credit cards are offered against a fixed deposit held at the bank. The credit limit on these cards is usually 80% to 90% of the linked FD value. Individuals can gradually improve their credit score by making timely payments on a secured credit card.
Example: A reputed bank offers a secured credit card that allows customers to pledge their fixed deposits as collateral and get access to a low-limit credit line. Secured Credit Card helps individuals build their credit history while enjoying the convenience of a credit card.
2. Unsecured Credit Card
An unsecured credit card is another option for individuals with bad credit scores. Unlike secured cards, unsecured cards do not require collateral or security deposit. However, these cards typically come with higher interest rates and fees compared to regular unsecured cards.
Example: XYZ Bank offers an unsecured credit card for individuals with bad credit scores. Although unsecured credit card may have higher fees and interest rates, it provides an opportunity for individuals to demonstrate responsible financial behaviour and improve their creditworthiness over time. The unsecured credit card comes with annual fees to see if you are responsible or not with the credit limit.
How to Improve Your Credit Score?
Improving your credit score is crucial to access better credit card options in the future. Here are some actionable steps you can take:
- Make timely payments on all debts: Paying your bills and loan EMIs on time demonstrates responsible financial behaviour and boosts your creditworthiness.
- Keep credit utilisation low: Try to keep your credit utilisation ratio below 30%. This means using only a portion of the available credit limit on your cards.
- Avoid applying for multiple credit cards or loans simultaneously: Too many hard inquiries within a short period can negatively impact your credit score. Only apply for new credits when necessary.
- Regularly check your credit report: Check your credit score from reliable bureaus like CIBIL™ and check for errors or discrepancies. Dispute incorrect information to rectify your credit report.
- Build a positive payment history: Use your existing credits responsibly, making timely payments and avoiding defaults or late payments.
By following these steps consistently, you can gradually improve your credit score and become eligible for better credit cards with lower interest rates and fees.
Documents Required to Apply for a Credit Card
When applying for a low credit score credit card, you will typically need the following documents:
- Proof of Identity: Aadhaar card, PAN card, passport, or driver's license.
- Proof of Address: Utility bills, rental agreements, or bank statements with your current address.
- Proof of Income: Salary slips, income tax returns, or bank statements showing regular income.
- Existing Credit Card Statements (if applicable): Providing statements of existing credit cards can help lenders assess your credit history.
Note that specific requirements may vary based on the type of credit card and the issuing bank's terms and conditions. Always check with the bank or financial institution for detailed documentation requirements. There are various options for individuals with no credit score or credit card. With the above documents, you can try to apply for a credit card with bad credit.
Conclusion
Improving your credit score is crucial to accessing better credit card options in India. While individuals with bad credit scores have options like secured and unsecured credit cards, it's essential to take steps towards improving their creditworthiness. By using credit cards responsibly and making timely payments, individuals can gradually rebuild their credit history and gain access to more favourable terms and conditions in the future.
At Shriram Finance we understand the challenges faced by individuals with poor credit scores. We offer various credit solutions tailored to meet different financial needs, including personal loans and fixed deposits. Apply for a fixed deposit today and keep your finances safe. Our dedicated team can guide you through the process of improving your financial situation while helping you achieve your goals.
Remember, a poor credit score doesn't have to be permanent. With the right strategies and financial discipline, you can avail of a credit card with a bad credit score.
Key Highlights:
- Types of Credit Cards: There are options available even if you have a low or poor credit score. Secured credit cards and certain unsecured credit cards can be obtained to improve your creditworthiness.
- Importance of Credit Score: Your credit score plays a significant role in determining your eligibility for credit cards and loans. Lenders prefer individuals with good credit scores as they reflect responsible financial behaviour.
- Process to Improve Credit Score: By making timely payments, keeping credit utilisation low, avoiding new credit inquiries, and regularly checking credit reports for errors, you can gradually improve your credit score.
- Documents Required: When applying for a credit card with a poor credit score, you will typically need proof of identity, address, income, and other necessary documents.
Frequently Asked Questions:
1. How important is a Credit score to get a credit card?
Having a good credit score is crucial when applying for a credit card. Most lenders prefer to provide credit cards and loans to individuals with good credit scores as it indicates their creditworthiness and ability to repay debts on time.
2. What are the factors that are included in the calculation of the credit score?
The credit score is calculated based on various factors such as payment history, credit utilisation ratio, length of credit history, types of credit used, and new credit inquiries. These factors help lenders assess an individual's financial behaviour and determine their creditworthiness.
3. What is the significance of the credit score range?
Credit scores typically range from 300 to 900. A higher credit score indicates a lower risk for lenders and increases the chances of getting approved for a credit card or loan. Individuals with scores below 600 are considered to have poor or bad credit, making it more challenging to obtain traditional unsecured credit cards.
4. What is the easiest credit card to get with bad credit?
For individuals with bad credit, secured credit cards are often the easiest option to obtain. These cards require a security deposit as collateral, mitigating risk for lenders. By responsibly using a secured credit card, individuals can rebuild their credit over time and eventually qualify for unsecured cards with better terms.
5. Is there a credit card I can get with a 500 credit score?
With a low credit score like 500, it may be difficult to qualify for many unsecured credit cards. However, some lenders offer special low-credit-score credit cards that cater to individuals seeking to rebuild their credit history. These cards often come with higher interest rates and fees, but they can be valuable in rebuilding your credit profile over time.
