How to use a secured credit card to improve CIBIL score? Here's a guide

Procuring and using a secured credit card can be a useful tool to improve your CIBIL score. Here's how to effectively use a secured credit card to improve your credit score:

Use a secured credit card in the following way:

Security deposit: Secured credit cards require a security deposit, which typically becomes your credit limit. This reduces risk for the issuer, making it easier to qualify for even if you have limited or poor credit history.

Regular Payments: The most important factor in building good credit is making on-time payments. Make sure you pay your secured credit card bill in full and on time each month. Late payments can hurt your credit score.

Low balances: Try to keep your credit card balances low compared to your credit limit. High credit utilization can negatively affect your credit score. Ideally, try to keep your credit utilization below 30 percent of your credit limit.

Responsible Use: Treat your secured credit card like any other credit card. Use it for small purchases that you can pay off each month. Avoid overspending and carrying a balance, as this leads to accumulating interest charges and potentially harming your credit score.

Upgrade to an unsecured card: After using a secured credit card responsibly for a while, you may qualify for an unsecured credit card with better terms and benefits. Some issuers may offer to convert your secured card to an unsecured card if you demonstrate responsible credit behavior.

By following these steps and using your secured credit card responsibly, you can gradually build a positive credit history and improve your CIBIL score over time.

Frequently Asked Questions:

What is a secured credit card?

Secured credit cards require a security deposit, which typically becomes your credit limit.

What is the best way to use a secured credit card?

It is advisable to treat your secured credit card just like any other credit card. One should use it for small purchases that one can afford to pay off each month.

What should you be careful about after getting a secured credit card?

The key factor in building good credit is making payments on time. Therefore, one must ensure that the bills are paid in full every month.

Can you upgrade a secured card to an unsecured one?

After using a secured credit card responsibly over a period of time, you may qualify for an unsecured credit card with better terms and benefits.

Should You Keep Your Secured Credit Card Balance Low?

Yes, one should try to keep the credit card balance low in relation to the credit limit. High credit utilization can negatively affect your credit score.

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