Credit Score for Credit cards
Want a credit card in 2024?
Many of us do. Credit cards can get us out of a jam and they can also help us to buy something – shall we say – a little more luxurious that doesn’t need to be paid in full just yet. Think: Much-needed vacation, a new car – that sort of thing.
Before you can get a credit card, though, you need a good credit score.
The Importance of a Good Credit Score
No lender in India will give you a credit card before they’ve assessed your credit score. In fact, it’s arguably the most important consideration for a lender.
Why?
Because your credit score tells the lender how likely it is that you’ll repay his or her loan.
The things they’ll look at include your:
- Payment history
- The amount of money you owe/have owed
- Your credit mix
- Any new accounts you’ve got
- How old/recent your credit history is
Within your credit score might be red flags, such as a mortgage default or a late payment. These are the sort of things that massively impact your score, and which can persuade a lender not to give you a credit card.
On the other hand, you might have a good credit score that’s free from blemishes. In this case, you might qualify for a new credit card.
What Impacts a Credit Score the Most?
Let’s now take a closer look at some of the key things that impact your credit score, and which a lender will examine carefully.
Payment History
If you’ve been repaying your previous loans and/or credit card bills on time, this will be reflected positively in your credit score.
If, on the other hand, you’re often late with your payments (or if you’ve missed payments entirely), this will negatively impact your score.
Credit Utilization
In other words, how many credit limits are you currently using? If you’re using less than 30%, this will be reflected positively on your credit score.
Time of Credit History
How long have your accounts been stable (or unstable) for? The longer your accounts have been stable, the easier it will be for you to have a favorable credit score.
Types of Credit Accounts
You might have a mortgage, a loan or another credit card on the go. Indeed, across a wide range of credit accounts, Americans as a collective owe more than $1,000,000,000,000 in credit card debt.
Your different types of credit accounts will all be taken into consideration by the lender who’ll use them to get a better understanding of how you’re able to manage different kinds of credit.
Credit Inquiry Activity
Lastly, a potential lender will want to see how many credit cards or loans you’ve applied for recently. If you’ve had a burst of activity and applied for various credit cards over a short period of time, it puts the lender on red alert.
How You Can Improve Your Credit Score
If you think that your credit score is poor, you don’t need to give up just yet. A credit score is fluid and can be improved by doing the right things:
Pay the Bills on Time
The easiest way to make a positive impact on your credit score is to pay your bills on time. These include all credit card bills, as well as any loans you might have.
Lower Your Credit Card Balance
If you’ve currently got a credit card and the balance is quite high, make efforts to bring it down.
Keep Checking Your Credit Report
A credit report isn’t always accurate – and this isn’t necessarily your fault. In fact, the credit bureaus can make easy mistakes that, unless spotted, can harm your credit score.
So keep checking your report to make sure everything is correct.
Improve Your Habits
Credit habits take time to be developed. Some of us have bad habits right from the start but the good news is that these habits can be undone. New ones can be learned.
Start being responsible with your credit, pay your bills on time and good things will happen.
Final Thoughts
If you’re applying for a credit card, it’s imperative that you know your credit score. If your score is poor, it will harm your chances of attaining a new credit card.
Once you understand your credit score, you can then start to make better financial decisions that bump-up your numbers and strengthen your chances of securing credit in the future.
Credit Scores: FAQs
1. Is it possible to get a credit card if I have a low credit score?
While it’s harder to get a credit card if you have a low credit score, there are still some lenders who will offer a credit card to people with poor credit scores.
2.How often should I test my credit score?
Checking your score regularly (at least every few months) is essential if you want to learn what needs to be done to improve your rating.
3. How long will it take to improve your credit score?
How long it takes you to improve your credit score will depend on what sort of changes you need to implement. The main thing is that you change your habits (such as paying your bills on time) and stick to them over the long-term.
4. Are there any quick fixes to improving my credit rating?
Long-term responsibility is key to improving your credit rating. Any changes you make in the short-term must be maintained, as this is the only way to successfully improve your credit rating