Procuring and using a secured credit card can turn out to be a useful tool in order to improve your CIBIL score. Here’s how you can use a secured credit card effectively to improve your credit score:
Use secured credit card in the following way:
Security deposit: Secured credit cards require a security deposit, which typically becomes your credit limit. This reduces the risk for the issuer, making it easier to qualify for even if you have limited or poor credit history.
Regular payments: The most important factor in building good credit is making on-time payments. Ensure you pay your secured credit card bill in full and on time every month. Late payments can have a negative impact on your credit score.
Low balances: Aim to keep your credit card balances low relative to your credit limit. High credit utilisation can negatively affect your credit score. Ideally, try to keep your credit utilisation below 30 percent of your credit limit.
Responsible usage: Treat your secured credit card like any other credit card. Use it for small purchases that you can afford to pay off each month. Avoid overspending and carrying a balance, as this can lead to accumulating interest charges and potentially harming your credit score.
Upgrade to an unsecured card: After using a secured credit card responsibly for a period of time, you may qualify for an unsecured credit card with better terms and benefits. Some issuers may even offer to convert your secured card into an unsecured one if you’ve demonstrated responsible credit behaviour.
By following these steps and using your secured credit card responsibly, you can gradually build a positive credit history and improve your CIBIL score over time.
Also Read : Have poor credit score? Here are 7 simple steps to improve it
Frequently Asked Questions:
What is secured credit card?
Secured credit cards require a security deposit, which typically becomes your credit limit.
What is the best way to use a secured credit card?
It is advisable to treat your secured credit card just like any other credit card. One should use it for small purchases that one can afford to pay off each month.
What should one be careful about after getting a secured credit card?
The key factor in building good credit is making on-time payments. So, one should ensure to pay bills in full every month.
Can you upgrade a secured card to an unsecured one?
After using a secured credit card responsibly for a period of time, you may qualify for an unsecured credit card with better terms and benefits.
Should you keep balance low in secured credit card?
Yes, one should aim to keep credit card balance low with regards to the credit limit. A high credit utilisation can affect your credit score adversely.
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Published: 12 Mar 2024, 05:03 PM IST