Are you considering applying for a Credit Card? It is best you understand what factors play a role in the acceptance or rejection of your application, so you can be sure that your application will be approved on the first try. There are various factors that influence the decision, but your credit score matters most. Let us try and understand this better:
What Is A Credit Score?
A 3-digit number that falls in the range of 300 to 900 is often used to determine your financial status and your eligibility for various financial services. It provides money lenders with a quick picture of your financial standing by revealing your credit history and records of payments. The Credit score issuing authorities in India are Equifax, Experian and CIBIL.
What Does it Mean for Money Lenders?
Money lenders use this score for assessing the risk that they might be undertaking by giving you a loan or issuing a credit card. Taking a look at your past records gives them a clear idea of your ability to repay loans or credit amounts. If you have a great credit score, you are a safe investment for them. But, there are other factors at play as well.
What Is A Good Credit Score?
A score of 750 and more is considered good and helps in getting approval for a credit card or a loan. This score will indicate that the individual has been financially disciplined for a long time and can be trusted with more money.
Is It Possible To Get Approval with a Credit Score of Less Than 750?
Yes, it is possible but the procedure is longer for such individuals and they would not be able to get the same benefits when compared to users with higher credit scores. People with low credit scores generally have very low credit limits and higher interest rates. You also may not be able to receive the full benefits of your card if your credit score is low. Hence, make sure you have maintained a credit score of 750 or above before you send in an application for a credit card.
Why Do People Get Low Credit Scores?
Other than the obvious mismanagement of finances, there are other factors which could affect the score. Even if you have been disciplined, emergency situations may have affected your score. The absence of financial instruments such as loans and credit cards leads to a lack of credit history that can be analysed. This also affects the credit score. Repeated rejections for application of a credit card further reduce your score and make it harder to get your application approved.
How Can Credit Scores Be Improved?
If you have a low score, you can apply for a card while providing the bank with security in the form of a fixed deposit. The credit card that you now get works the same way as a regular credit card. By being regular and disciplined with card payments, you can head towards an improved score.