The Role Of Credit Score In Credit Card Approval

Credit cards have become an essential financial tool for many Indians. They offer convenience, flexibility, and the opportunity to build a good credit history. However, you need a credit score for credit card approval.

This article will explore how your credit score affects credit card approval and explain why banks and NBFCs consider it when evaluating applications.

Understanding Credit Scores

Your credit card score is a three-digit number that reflects your creditworthiness. One of the most reliable sources for obtaining your credit report and checking your credit score online is TransUnion CIBIL (Credit Information Bureau India Limited). Maintaining a healthy credit report helps you get hassle-free access to various financial products. For a credit card CIBIL score is important.

Credit Score For Credit Card Approval

When applying for a new credit card, lenders evaluate your creditworthiness by checking your credit card score. A higher credit score indicates that you have been responsible for managing debt and making timely payments.

Minimum Credit Score For Credit Card Approval

The minimum credit card score required for credit card approval may vary from lender to lender. Although, a credit score of above 750 is treated as a benchmark in the market, for NBFCs, a credit score of 700+ is considered good enough to approve a credit card. It is essential to note that apart from meeting the minimum credit score criteria, you need other eligibility criteria set by the lender like age, income, occupation, residence, and credit history.

Factors Considered Alongside Credit Score

While the credit card score is an important factor in determining credit card approval, lenders also consider other aspects of your financial profile. These may include your income level, employment stability, existing debt obligations, and your number of active accounts. Financial institutions want to ensure you have sufficient income to responsibly manage new debt.

Why Banks/Nbfcs Check Credit Scores For Credit Card Approvals

Credit cards are unsecured forms of credit, meaning they do not require collateral or security against the amount borrowed. As a result, banks and NBFCs face a higher risk when issuing these cards. By checking applicants' credit card scores, financial institutions can assess their ability to handle new debt responsibly.

Maintaining Good Credit Score For Hassle-Free Credit Card Approvals

Here are some tips to help you maintain a healthy credit score:

1. Pay your bills on time: Set up automatic bill payments or reminders to ensure you never miss a due date.
2. Keep credit utilisation low: Aim to keep your credit utilization ratio below 30% to demonstrate responsible credit management.
3. Limit new credit applications: Every time you apply for new credit, it results in a hard inquiry on your credit report, which can temporarily lower your credit score. Only apply for new credit when necessary.
4. Monitor your credit report regularly: Check your credit report at least once a year to detect any errors or fraudulent activity. You can obtain a free copy of your credit report from TransUnion CIBIL and other authorised credit bureaus.

Conclusion

Your credit score plays a significant role in determining whether you will be approved for a credit card or not. Maintaining a good credit score, paying bills on time, and managing debt responsibly increases your chances of obtaining hassle-free access to various financial products.

If you are looking to fund your small business or get your dream home or a car, Mahindra Finance is your trusted partner. We understand your financial aspirations and provide personalized solutions with competitive rates, flexible terms, and exceptional service to help you achieve your dreams effortlessly.

FAQs

Q: Can I check my credit score online?

A: Yes, you can check your credit score online through TransUnion CIBIL and other authorised credit bureaus.

Q: What is considered a good credit score for obtaining a credit card?

A: Financial institutions generally consider a credit score above 750 as good for credit card approval.

Q: Does having multiple credit cards improve my credit score?

Having multiple credit cards can positively impact your credit score till you manage them responsibly. 

Q: Can I get a credit card with a low credit score?

A: Yes, there are financial institutions that offer secured credit cards against fixed deposits for individuals with low credit scores.

Q: How often should I check my credit report?

A: It's advisable to check your credit report at least once a year to detect any errors or fraudulent activity and ensure the accuracy of your financial information.