Secured credit card- Repair CIBIL score

A secured credit card unlike a normal credit card is backed by a deposit amount which acts as collateral for the credit provided with the card. The credit limit depends on the credit history and the deposit amount. In today’s world no one likes to be a defaulter purposely however no one can avoid the unforeseen circumstances. There are two types of defaulters in relation to credit cards: Non-wilful defaulters and wilful defaulters. In case of non-wilful defaulters, the borrower does not default intentionally and needs time to pay off his dues. His circumstances force him to default however in case of wilful defaulters the borrowers purposely does not pay the credit amount due on him.

CIBIL scores are linked to the credit cards. CIBIL scores are otherwise known as the credit score. It is a three digit number and is derived based on the CIR. In this context it is important to understand how the CIBIL score is advantageous and why it is essential to maintain a higher CIBIL score. In simple terms higher CIBIL score means more chances of getting a loan amount sanctioned to buy a property. In order to maintain a higher CIBIL score one has to maintain a strong portfolio and clear his dues regularly.

It is advised to use the credit card wisely. Usually one must use only 30%-40% of the credit limit each month which controls his expenses. There are many factors which influence the CIBIL score and it includes regular payment of credit card dues in time , one should not be very greedy while purchasing a credit card in case the bank is offering free credit card, do not be a spendthrift and use credit cards liberally and last but not the least secured loans helps in improving the CIBIL scores. It is inevitable that once the CIBIL scores degrade it is very difficult to repair the same.

Banks are very strict towards CIBIL scores. The risk involved is bank measure their wilful and non-wilful defaulters in the same scale. Both of them are treated like criminals. There is no provision for non-wilful defaulters to upgrade their CIBIL scores which is unjust. It is very easy to spoil the CIBIL score however it takes years to build it up. The bank and the individual both are responsible to build the CIBIL score. Banks can show leniency to a handful of customers and customers on the other hand need to prove their credit worthiness by paying off dues regularly. Hence secured credit is a favourable option as it is backed by a deposit amount and is helpful in increasing the CIBIL score. It is similar to purchasing some land against a mortgage.

A secured credit card has the advantage over the unsecured credit card in that it is a winning situation for both the parties: the bank and the individual. The bank earns dual income in the form of interest from the deposit amount and the income and charges from the credit card. It is a two way income for the bank. On the other hand the individual gets benefit in the form of higher CIBIL score which can be used to get a loan amount sanctioned to purchase a property. It is important to understand a point that a secured credit card is synonymous to a debit card because just like a debit card, the individual can spend up to a specified balance which will be available against the deposit amount in the bank. Hence secured loans are a blessing in disguise.

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