Is your credit score enough for a credit card? Learn the requirements now

Credit cards are a convenient way to make smart transactions while earning cashbacks and rewards on your favourite brands. The cards come with exclusive offers on shopping, hotel booking, entertainment and on your daily payments. Your credit score is important when you apply for a credit card as it is what is taken into consideration on whether or not you will be eligible to apply for the card.

Understanding the credit score

The range of a credit score is from 300 to 900, and it is a numerical representation of an individual’s creditworthiness. This score is used by financial institutions to determine the level of risk involved in extending financial aid to a person. A higher credit score indicates responsible credit behaviour and increasing the probability of credit card approval.

Minimum credit score required for credit card approval

There is no universal minimum credit score required for credit card approval, but a score of 750 or better is usually considered favourable by most lenders. Scores in this range are more apt to lead to credit card approval with favourable terms and benefits. On the other hand, if you have a lower credit score, you may have difficulty obtaining unsecured credit cards and may be given cards with higher interest rates or a lower credit limit.

Why is a good credit score important for credit cards?

Credit card application approval: A higher credit score increases your chances of credit card application approval due as it reflects a responsible credit behaviour.

Lower interest rates and terms: With a high credit score, you may get a credit card with low interest rates as well as with better terms.

Access to premium credit cards: A higher credit score will enable you to obtain premium credit cards with cashback and other benefits.

Higher credit limit: Lenders often provide a higher credit limit on your credit card if you have a higher credit score as it reflects a better creditworthiness.

Other factors considered by card issuers along with credit scores

Along with your credit score, card issuers also consider other factors which are important for your credit card application:

Carrying too much debt: Although debts are paid on time, lenders may consider it a red flag if the debts are just too high.

High credit utilisation: Using a considerable section of your credit limit can decrease your chances of approval. Usually it is advisable to not exceed the credit utilisation ratio more than 30%.

Short credit history: A short credit history may not provide sufficient data to lenders in order to assess your creditworthiness.

Unsecured loans: If you have more unsecured loans than secured ones, it may reflect as a risk for the card issuers. This is because this portrays your creditworthiness as highly dependent on debt.

High EMI to income ratio: If you have a higher EMI to income ratio, it means that a large chunk of your income goes towards repaying your ongoing debts. This increases the chances of default in bill repayments.

Alternative options to consider

In case you do not fall under the eligibility criteria of your desired credit card, you can consider other options which may align with your requirements as well as help you to build a strong credit score gradually.

Fixed deposit secured credit cards: These cards are issued against a fixed deposit which can help in building or improving credit history over a period of time.

Secured loans: Opting for a secured loan can help you build a strong credit score gradually after making timely repayments of your EMIs. This way you can not only maintain a healthy credit mix but can also improve your overall credit profile.

Opt for an add on credit card: Having yourself added as an add on on a family member’s credit card will help you build a credit history.

In conclusion, a healthy credit score is an important factor in helping you grab your desired credit card as well as improve your chances of securing future credits. Hence, make sure that you stay ahead of your debt repayments and use your credit card only when necessary so that you can save yourself from a hefty bill which you may not be able to repay or may add a burden to your finances.

(Note: Using a credit card carries its own set of risks)