Importance of Credit Score While Applying for a Credit Card

Posted on Thursday, March 9th, 2023 | By IndusInd Bank

Credit score plays an important role in many aspects of personal finance, and is an indicator of your credit worthiness. When you apply for a credit card, the bank/financial institution assesses your eligibility basis several parameters, one of which is your credit score. Getting approval for a credit card can be quite challenging if you have a low credit score.

In this blog, we will discuss the importance of credit score while applying for a credit card and how you can improve it to increase your chances of getting approved.

What is a credit score?

A credit score is a 3-digit number that represents your ability to repay your debt on time. Credit score ranges from 300 to 900, and the higher is your score, the better is your creditworthiness.

Credit score is calculated using various factors, such as your repayment history, credit utilization, length of credit history, types of credit, and recent credit inquiries. Generally, a credit score above 750 is considered good, above 650 is considered average, and below 650 is considered low.

Why is credit score important while applying for a credit card?

Credit score is crucial when you apply for a credit card because it is one of the main factors that credit card issuer considers when deciding whether to approve or deny your application. A credit card issuing company uses your credit score to assess the risk of lending you money. If you have a high credit score, you are seen as less risky, and you are more likely to get approved for a credit card. On the other hand, if you have a low credit score, you are seen as riskier, and you are less likely to get approved for a credit card.

In addition to determining whether you get approved for a credit card, your credit score can also affect the terms of your credit card. For example, if you have a high credit score, you may qualify for a lower interest rate and  a higher credit limit. Conversely, if you have a low credit score, you may have to pay a higher interest rate or get a lower credit limit.

How can you improve your credit score?

A good credit score can help you increase your chances of getting approved for a credit card and getting better credit card terms. Here are a few tips you must keep in mind to boost your credit score.

1. Always repay your EMIs and dues on time: Your payment history is one of the most important factors that affect your credit score. Make sure to clear all your outstanding payments on time every month before the due date.
2. Balance your credit utilization: Your credit utilization is the amount of credit you use compared to the allotted credit limit. Keeping your credit utilization low (ideally below 30%) shows that you are financially strong and do not depend much on credit. Thereby, depicting less chance of repayment defaults.
3. Maintain a good credit mix: Having a mix of different types of credit, such as credit cards, loans, and a mortgage, can also help you improve your credit score.
4. Don’t make too many credit inquiries at once: Opening too many credit accounts or making too many hard enquiries with different lenders in a short span of time depicts you as a credit-hungry individual which affects your credit score adversely.
5. Check your credit report regularly: Errors in your credit report can negatively affect your credit score. Make sure to check your credit report regularly and report any errors.

To conclude, having a good credit score is essential when applying for a credit card. Credit card companies use your credit score to assess the risk of lending you money and determine the terms of your credit card. Improving your credit score can increase your chances of getting approved for a credit card and getting better credit card terms. By following the tips mentioned above, you can improve your credit score and lead a better financial future.

If you’re looking for a credit card that encompasses all the benefits and rewards to match your lifestyle, check our offerings and you’d definitely find your ideal pick. IndusInd Bank offers a range of lifetime free credit cards that enable you to enjoy exquisite privileges and help save more with reward points that never expire.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author 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.