Do you have a poor or non-existent credit score? Don’t worry! A credit card can come in handy.
Credit bureaus record your card activity and bill payments and use them to generate your credit score. So, practice good credit discipline, and you will improve your credit score in no time.
But, if you don’t have a card yet, this might sound like a catch-22 situation to you. After all, most card providers require you to have a good credit score before applying. So, how can you get a card in this scenario, let alone use one? The answer is a secured card.
Read this article to learn more about how a secured card can help you rebuild your credit score.
What is a Secured Credit Card?
If you have a bad credit score, card issuing companies will consider you a high-risk borrower. To reduce this risk, they will ask you for security before giving you credit. This card you avail against security or collateral is called a secured credit card.
Your bank will provide you with a secured card using your fixed deposits as collateral. Your credit limit is proportionate to the funds in your fixed deposit, usually around 85% of that amount.
How Does a Secured Card Work?
A secured card has all the perks of an unsecured card. You can use it to pay anywhere, earn rewards, and enjoy discounts as per your card’s features.
However, if you default on paying your bills, your bank has the right to liquidate the deposited amount and recover your debt. Additionally, you cannot break your deposit as long as you use your card.
How to Apply for a Secured Credit Card?
You can apply for a credit card online. It is fast, convenient, and 100% paperless.
- Create a fixed deposit with the bank from which you want a card. But, if you already have one with the bank of your choice, you can skip this step.
- Then, follow the instructions on your bank’s website. Since you are already a customer, you will have to provide only minimal details like your personal information and preferred card option.
- Fill out the application form and hit ‘Submit.’
- Applications for secured cards are processed and approved quickly. Once approved, your new card will be delivered to your doorstep in a few days.
How to Improve Your Credit Score?
With your new secured card, you can start building your credit score by using the following tips:
- Use your card regularly.
- Keep your card usage well under the credit limit. It is recommended that you use less than 30% of your credit limit each month.
- Pay your bills timely. To avoid missing out on payments, you can set up auto-pay. Link your savings account to your card, and the bill amount will be deducted automatically when the bill is generated.
- Once your credit score improves, consider getting an unsecured card as well. Having a mix of secured and unsecured credit also helps increase your credit score.
Getting a secured card is simple, fast, and requires no paperwork. So if you want to get one and improve your credit score, apply online for one today.
Remember to use your card wisely. Monitor your credit score and report regularly. Gradually, you will see your credit score improve.
Read more on KulFiy
Here are some key things to know before you apply for a business loan
How to manage Aadhaar card on personal loan?
What is a Top-Up Loan? Know Its Meaning & Purpose