How to get a credit card when your CIBIL score is poor? Here are 4 effective ways

It is simply because the credit score, also known as CIBIL score, is a key factor which banks base their decision on. A low CIBIL score usually indicates a higher risk to lenders, making them reluctant to extend credit. 

For instance, 21-year-old Manika Sharma who recently started working in advertising has no credit history, as a result of which she struggled to get a credit card for nearly three months. Eventually, she settled for a secured card which entails opening a deposit before the card of an equivalent amount can be issued.

There are some alternatives for credit card seekers with bad CIBIL score:

Secured credit cards: Secured credit cards are designed for individuals with poor or no credit history. With a secured credit card, you’re required to provide a security deposit, which serves as collateral for the credit limit you’re granted. Because the risk to the issuer is lower (since they have your deposit as security), you may have a better chance of approval even with a bad CIBIL score.

Credit cards with higher interest rates: Some lenders may offer credit cards to individuals with lower credit scores, but they might come with higher interest rates, annual fees, or other charges. Be cautious with these options, as they can be expensive, but they might be a possibility if you’re unable to qualify for traditional credit cards.

Smaller bank cards: While larger banks may have stricter criteria for approving credit cards, smaller banks or credit unions might be more flexible. They may be willing to consider factors beyond just your CIBIL score when assessing your application.

ALSO READ: Why is RBI wary of co-branded credit cards?

Credit cards with co-signers: If you have a family member or friend with a good credit history, you might consider applying for a credit card with them as a co-signer. Their creditworthiness can help offset your poor CIBIL score and increase your chances of approval. 

However, remember that if you fail to make payments, it will negatively impact both your and the co-signer’s credit scores.

Before applying for any credit card, it’s essential to understand your current credit situation and explore your options carefully. Additionally, take steps to improve your credit score over time by making timely payments, reducing outstanding debt, and managing your finances responsibly.

Frequently Asked Questions:

Does the collection notice impact the credit score?

If you have started receiving collection notices or calls from debt collectors, it’s an indication that you have unpaid debts that have been sent to collections. 

This can significantly damage your credit score and make it challenging to obtain credit in the future.

How can you improve the credit score?

You can work on improving your credit score by making timely payments, reducing outstanding debt, and maintaining a healthy credit utilisation ratio (CUR) before applying for a car loan.

Can you get car loan approved when the credit score is lower than 700?

If your credit score is lower than 700, you may still be able to qualify for a car loan, but you will in that case face higher interest rates or stricter loan terms. 

Does being a guarantor impact your debt burden?

Being a guarantor doesn’t raise the debt burden but is seen as a potential debt. However, the lenders can consider the guaranteed amount while determining borrower’s creditworthiness.

Is payment of debt enough to maintain a good CIBIL score?

Paying off debt is indispensable to maintain a good credit score. However, it is a responsible financial management that leads to a good CIBIL score.

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Published: 30 Mar 2024, 03:14 PM IST