The CIBIL score is considered as the standard credit score in India by more than 2,400 financial institutions. The score ranges from 300 to 900, and the higher the number, the more creditworthy you are.
This credit score is based on the Credit Information Report (CIR) which shows your various details. It includes your personal information, the number of credits you have availed, outstanding dues, overdue payments, payment overdue days, number of credit inquiries, etc. You will have a high credit score if you have paid all credits in due time without defaulting.
Other than these, a credit card application will also have an impact on your CIBIL score.
How are these applications and credit score related?
A lender will check your credit history and CIBIL score every time you submit an application. Lenders do so to see how you have managed your previous credits. They will check all the information in your CIR to ensure you are responsible in handling and repaying your credits.
The report includes information about all such inquiries made by lenders. These details can stay in your report for up to 2 years.
How will a credit card application impact your credit score?
The various records in your credit report contribute to your credit score. For example, your repayment history contributes 35% to the credit score; your outstanding balance 30%, the total duration of your credits 15%, your credit mix 10%, and the number of inquiries 10%.
Hence, your credit score will drop 10% when a lender inquiries of the same after an application. Applying for too many credit cards in a short span lowers your CIBIL score drastically.
Multiple applications won’t have an adverse effect if you hold a high score. However, a lender can decline your credit card application, as you have made numerous ones previously.
Too many applications make you look credit hungry. You also have a higher chance of defaulting on your payments with multiple cards.
How can you avoid lowering your credit score when applying for a card?
You cannot avoid lowering your credit score when you apply for a new card. However, you will get several opportunities to increase it after your instant credit card application is approved.
- Pay your bills within due time
As mentioned above, your repayment history contributes 35% to your credit score. Pay your card bills in time and your score will improve significantly.
- Never use more than 30% of your credit limit
Keeping your credit utilisation within 30% of the limit increases your credit score.
- Pay the total amount due
You can choose to pay either the minimum amount or the total amount due in your bill. However, always ensure to pay the full amount to increase your CIBIL score.The minimum amount is a specific percentage of the total amount and can also include the rate of interest. You will still have to pay the full amount due but in the next month.
- Never keep your card idle
Use your card frequently to improve your CIBIL score. Make your regular or big –ticket purchases using the same and clear all outstanding dues on the bill on time.
Also, ensure to fulfil all other credit card eligibility criteria when applying.
One of the exceptional choices you can get is the Bajaj Finserv RBL Bank SuperCard. It comes with pre-approved offers that make availing finance less time-consuming. Pre-approved offers are also available with personal loans, business loans, home loans, and several other financial products.
You can check out your pre-approved offer by providing only your basic details.
You can get up to 20,000 reward points when you apply for the Bajaj Finserv RBL Bank SuperCard. The card also has several industry-first features like interest-free ATM cash withdrawal, an emergency loan and more.
Gaurav Khanna is an experienced financial advisor, digital marketer and writer who is well known for his ability to predict market trends. You can find Gaurav on Linkedin.