A credit score is a 3-digit number that quantifies your creditworthiness. The number ranges from 300 to 900 in India. Several financial institutions compute these scores of individuals by considering variables such as credit history length, credit mix, payment history, credit exposure, and credit history.
Since new borrowers cannot furnish much of the aforementioned variables, such individuals usually start with a secured credit card to develop their credit history.
When you apply for a secured card, you need to pledge a sum of money as collateral. For instance, several financial institutions offer cards against fixed deposits.
You can utilize such a card to develop and improve your credit score and credit history. When you make timely repayments of your bills in full every month, it reflects that you have a sound repayment capability. If you maintain this discipline consistently, it establishes you as a creditworthy borrower and augments your score.
You should also beware of your credit utilization ratio when using a credit card. It represents the percentage you utilize from your limit every month. A lower ratio would improve your score significantly.
A secured card has a lower interest rate compared to its unsecured counterpart. Additionally, when you apply for a secured credit card, the documentation required is minimal.
Although the process of credit score development consumes time, it is worthwhile as it potentiates you to avail for reputed and unsecured cards such as Bajaj Finserv RBL Bank SuperCard in the future.
An unsecured card contains several benefits that surpass what the secured variant offers, for instance, credit card loan, wherein you can avail loans against your credit card’s unutilized limit.