The CIBIL score, a numerical value ranging from 300 to 900, is provided by TransUnion and serves as an indicator of an individual’s creditworthiness. Maintaining a robust CIBIL score, preferably above 750, is crucial as it ensures access to essential credit products with favorable interest rates.
Credit cards are a recommended method for establishing a strong credit score and credit history from a young age. Several entry-level cards, such as the OneCard and IDFC First Bank’s WoW card, can be obtained by securing them against fixed deposits (Secured Cards). These options are highly advisable.
Secured cards should only be considered if unsecured cards are not available, such as for students. Otherwise, tying up funds in fixed deposits is not a recommended approach. Fixed deposits do not yield the highest returns, and the money remains locked until the card is held, affecting liquidity.
However, it’s important to remember that credit cards can be a double-edged sword when it comes to building a favorable credit score or CIBIL. To ensure that you build a positive credit score rather than harm it, it’s imperative to make timely payments on your credit card bills.
CIBIL scores primarily depend on factors like on-time payments, credit utilization ratio, the age of credit accounts, the number of accounts, the number of inquiries, and profile information consistency. These parameters carry different weightages, as outlined in the table below.
