#credit_card #credit_score | Read More: Credit Card Blogs | Credit Score Blogs
Introduction
Having a poor credit score can make it difficult to access a variety of financial products, including credit cards. In India, where credit is an essential part of daily financial transactions, many people with poor credit scores struggle to secure credit cards. But don’t worry—there are credit cards for poor credit that can help you rebuild your credit history and improve your financial health.
In this blog post, we'll explore credit cards for poor credit in detail, including how they work, their benefits and drawbacks, eligibility criteria, and some top recommendations available for Indian users. If you're someone who has faced challenges with securing a credit card due to your poor credit score, this guide will provide valuable insights into navigating this financial roadblock.
Credit Cards for Poor Credit Scores?
Credit cards for poor credit are specifically designed for individuals who have a low credit score (usually below 600 in India) or no credit history at all. These cards often come with more relaxed eligibility requirements, allowing people with poor credit to access credit and begin rebuilding their financial standing.
Types of Credit Cards for Poor Credit Scores
There are two primary types of credit cards for people with poor credit:
Secured Credit Cards: These cards require you to make a security deposit, which usually acts as your credit limit. For example, if you deposit ₹20,000 with the bank, your credit limit would likely be ₹20,000. Secured credit cards are an excellent way for individuals with poor credit to rebuild their credit scores.
Unsecured Credit Cards: These are similar to regular credit cards, where you don’t need to provide a deposit. However, these cards typically come with lower credit limits and higher interest rates to compensate for the risk involved.
How Do Credit Cards for Poor Credit Scores Work?
Credit cards for poor credit function similarly to traditional credit cards, but with a few key differences.
3.1. Secured vs. Unsecured Credit Cards
Secured Credit Cards
For those with poor credit, secured credit cards are generally the best option to start. As the name suggests, these cards are "secured" by a cash deposit made by the cardholder. The deposit is refundable, and as long as you make timely payments, your credit score will gradually improve. The security deposit is often used as collateral in case the cardholder fails to make payments.
How it works:
You deposit a fixed amount with the bank (e.g., ₹10,000 or ₹20,000).
You get a credit limit equal to your deposit.
You use the card and make regular payments.
After 6-12 months of responsible usage, your credit score may improve, and you can request an unsecured credit card or get your deposit back.
Unsecured Credit Cards
Unsecured credit cards don’t require a deposit but come with higher interest rates and lower credit limits. These cards are riskier for banks since they have no collateral to fall back on. However, with consistent payments and responsible usage, they can also help you rebuild your credit score.
How it works:
You are given a fixed credit limit based on your financial profile, but without needing to provide a deposit.
Interest is charged on any balance carried beyond the due date, and high interest rates typically apply to users with poor credit.
As you prove your ability to manage credit responsibly, your credit score and card terms may improve.
Eligibility for Credit Cards with Poor Credit in India
In India, eligibility for credit cards for poor credit varies by bank and card issuer. While the exact requirements depend on the issuer, most institutions will look at factors such as your income, employment status, and existing debts when evaluating your application.
General Eligibility Criteria:
Low Credit Score: A score below 600, though some banks may issue credit cards with scores as low as 550.
Income Level: You’ll need to show proof of a stable income, even if it’s lower than average. Some banks allow applicants with an income of ₹10,000-₹15,000 per month to apply for secured cards.
Employment Status: You must have a full-time job or a steady source of income, whether salaried or self-employed.
Debt-to-Income Ratio: Lenders assess whether you can manage another financial obligation based on your existing debt-to-income ratio.
Advantages and Disadvantages of Credit Cards for Poor Credit
Before applying for a credit card for poor credit, it's important to understand both the benefits and the limitations.
Advantages:
Helps Build Credit History: Regular use and timely payments of these cards can help rebuild your credit score.
Access to Emergency Funds: Credit cards provide a financial cushion in case of an emergency.
Increased Purchasing Power: A credit card increases your ability to make purchases and pay later.
Rewards: Some secured credit cards offer basic rewards programs, such as cashbacks or discounts on purchases.
Disadvantages:
High Interest Rates: Credit cards for poor credit tend to have much higher interest rates than standard cards, making it costly if the balance is not paid off in full.
Low Credit Limits: Most cards for poor credit have lower credit limits, limiting your spending capacity.
Security Deposit: For secured cards, you may need to pay a deposit upfront, which could be a financial burden.
Fees: Some cards may carry annual fees, monthly maintenance fees, and late payment penalties.
Top Credit Cards for Poor Credit Scores in India
If you’re ready to apply for a credit card to improve your financial standing, here are some of the top credit cards for poor credit in India:
1. SBI Unsecured Credit Card for Bad Credit
The SBI Unsecured Credit Card is ideal for individuals who want an unsecured card with a lower credit score. While it comes with a higher interest rate, it’s a good starting point for rebuilding credit.
2. HDFC Bank Regalia First Credit Card
For individuals who are looking for an entry-level, unsecured card, the HDFC Regalia First offers perks like airport lounge access and rewards for responsible card usage.
3. ICICI Bank Coral Credit Card
The ICICI Bank Coral Credit Card is another popular option for those looking to improve their credit score. It offers cashback, discounts on dining, and movie ticket bookings, making it an appealing choice for low-income applicants.
4. Axis Bank Insta Easy Credit Card (Secured)
This is an excellent option for individuals with poor credit looking for a secured credit card. You can start by depositing a minimum of ₹20,000 to get a credit limit equal to your deposit.
How to Improve Your Credit Score and Qualify for Better Cards
If you have a poor credit score and want to qualify for better credit cards in the future, here are a few steps to improve your score:
Pay Your Bills on Time: Timely payments have the most significant impact on your credit score.
Reduce Existing Debt: Pay off high-interest debts or loans before applying for new credit.
Keep Your Credit Utilization Low: Avoid using too much of your available credit. Aim for a utilization rate below 30%.
Avoid Multiple Credit Applications: Applying for multiple cards within a short period can negatively impact your score.
Conclusion
In conclusion, credit cards for poor credit offer a practical solution for individuals in India with a low credit scores to rebuild their credit history. Whether through secured or unsecured credit cards, responsible use, and timely payments can gradually improve your credit score and provide you with access to better financial products in the future.
While these cards may come with higher fees and interest rates, they provide an opportunity to develop a stronger financial future. Ensure you carefully weigh the pros and cons, choose the right card, and follow best practices for managing your credit to see your score rise.
For more detailed information on improving your credit score, you can refer to Experian India or the Reserve Bank of India.
Comments