Learn how to increase your credit score with a Secured Credit Card

Do you want to improve your credit score in India but don't qualify for a traditional credit card? Worry not - secured credit cards can help. These credit cards allow you to build a credit score even if you have poor credit or no credit history at all.

This article explains how secured cards work, their pros and cons, and how to boost credit scores fast with secured cards such as the FIRST WOW! Credit Card. You will learn tips to maximise credit building while avoiding fees and high-interest rates. The key takeaway? Used strategically, secured cards offer a path to credit score improvement.

What are secured Credit Cards?

Secured credit cards are designed for those with limited or damaged credit. They offer low-risk access to credit, allowing you to build credit history over time by responsibly using and repaying the card.

How do they work differently from regular Credit Cards

With a secured card such as the FIRST WOW! Credit Card, you provide a cash deposit as collateral to secure your line of credit. Your limit is typically equal to your deposit. The card issuer reports your payments to the credit bureaus, allowing you to establish a good payment pattern. After 6-12 months of on-time payments, you may qualify for an unsecured card and get your deposit back.

Here are the key benefits of secured cards -

• Build credit from scratch

Secured cards are easy to qualify for, even with bad or no credit.

• Low fees

Secured cards typically have few or no annual fees. The FIRST WOW! Credit Card has no fees at all.

• Responsible credit limit

Your limit is based on your deposit, so you can only spend what you can afford to pay back.

• Get your deposit back

If you use the card responsibly, the issuer may return your deposit and upgrade you to an unsecured card.

How to use a secured card responsibly to increase your credit score fast

Here’s how to increase your credit score using a secured credit card -

• Make timely payments

The most important thing you can do is pay your bill on time each month. Payment history makes up 35% of your credit score, so paying on time is the best way to build credit with a secured card. Set up automatic payments for at least the minimum due to ensure you never miss a payment.

• Keep low balances

Your credit utilisation ratio, or how much of your available credit you use, makes up 30% of your credit score. Keep your balances low relative to your credit limit. A good rule of thumb is to use at most 30% of your available credit. For example, if your limit is ₹ 50000, charge ₹ 15000 at most. Pay back the balance before your statement closing date.

• Limit applications

Applying for too many new credit cards can hurt your score. New credit applications make up 10% of your score. Only apply for new credit when needed. Wait at least 6-12 months before applying for an unsecured card to allow time for your score to improve.

• Check your score regularly

Monitor your credit score regularly to check for signs of fraud and to see your progress. You can get free credit scores and reports from credit monitoring services. Ensure there are no errors on your reports that could lower your score. Dispute them with the credit bureaus to get them corrected.

• Ask for a credit limit increase

Once you have established a good payment pattern over 6-12 months, ask your card issuer for a credit limit increase. They may increase your limit without requiring an additional deposit. A higher limit will lower your utilisation ratio, which helps your score.

FIRST WOW! Credit Card - Your credit-building powerhouse

The FIRST WOW! Credit Card is a premium secured credit card designed to help you enhance your credit score while offering benefits. Here's why you should consider it –

• Backed by fixed deposit -

The FIRST WOW! Credit Card is secured by a cash deposit that you make upfront. Your deposit amount determines your credit limit so you can get approved for a card, even with bad or no credit score. The deposit also ensures the bank that your balance will be paid, reducing their risk. After 12-18 months of responsible use, your card may qualify to transition to an unsecured card, and your deposit will be refunded.

• Rewards and benefits -

The FIRST WOW! Credit Card allows you to earn generous rewards for your everyday purchases. You earn 4X rewards points for every ₹ 1 spent, which can be redeemed for cashbacks, gift cards or travel. Since the points you earn are directly proportional to how much you spend, the more you use your card, the faster your rewards add up.

• Affordable and convenient -

With no annual fee and competitive interest rates, the FIRST WOW! Credit Card is an inexpensive way to build your credit score. It also provides the convenience of a credit card for making purchases online or while travelling. You enjoy fraud protection, 24X7 customer service and the ability to set up automatic payments to ensure you never miss a payment.

• High credit limit -

Unlike traditional secured credit cards that might limit you to a 50% or less credit line of your deposit, the FIRST WOW! Credit Card offers a credit limit of at least 100% of your fixed deposit value. This gives you greater flexibility when making purchases and helps you keep your credit utilisation ratio low, which is a key factor in improving your credit score in India.

Boost your credit score today

If you are ready to start building your credit history and improving your credit score in India, a secured credit card like the FIRST WOW! Credit Card is the ideal tool. With responsible use and on-time payments, you will soon be on your way to establishing your creditworthiness.

Just make sure to avoid high fees and interest charges and use the card wisely. Secured cards provide training wheels for credit newbies - take advantage of them to demonstrate that you have what it takes to handle credit responsibly.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.