Saurav Makhija, kick-started his career with a fast-paced start-up at a package of Rs 5 lakh per annum. When he approached one of the leading private sector banks for a credit card his application was rejected. As he was a salaried person who never had any debt, he thought any bank should be more than happy to give him a credit card. To his surprise, the bank denied him credit card because he never had credit history by way of credit card or loan.
Saurav was puzzled. It seemed like a catch-22 situation to him. He is denied credit card because he doesn’t have a credit record but how can he have any till he owns any credit. So, is there any way out or Saurav will have to do without a credit card?
There are options for people like him who don’t have a credit history. Listed below are some of the ways.
- Apply with other banks
Before, doing anything else what you can do is apply to another bank for credit card. Different banks have different criteria for issuing credit cards. One of the criteria used by banks is the track record of the company you are working with. Banks, generally, categorize companies as “A”, “B” and “C” , and ones that cannot be allotted to these heads, are saved under uncategorized. If your company falls in the “uncategorized” category, the bank may reject your credit card application. As in the case of Saurav, the company he is working with is a startup, so banks may have reservations in giving credit to employees of that company. But you should try your luck with another bank. You should try with the bank with which you have a salary account. If the bank is offering a credit card, the chances are higher that your application is accepted.
- Opt for asset-backed credit cards
You can also opt for asset-backed credit cards. These are also known as secured credit cards, these are issued against fixed deposits made with the bank.The fixed deposits are lien marked and you cannot close them as long as you own the credit card. In case of default on bill payment, the bank can utilize the fixed deposit to settle the outstanding amount. Usually, banks provide upto 85% of the fixed deposit as credit imit. Secured credit card works like a normal credit card while you continue to earn interest on your fixed deposit.
Once you have secured such card, you can pay your bills on time to build a credit record. Banks will send the same information to the credit bureau.Once you have build up a good credit track record, you can apply for a normal credit card.
- Take secured loans to build credit history
In case of lack of credit history banks are reluctant to provide any type of credit as they don’t have your past track record. The best way to build a credit history is to take a secured loan such as home loan or car loan. Such loans are relatively easy to get even if a person doesn’t have a credit history because the asset works as collateral here. The bank has the right to liquidate the asset in case of any default to recover the debt, so, banks will be less reluctant to give you the loan.
Use the above options to procure your first credit card and once you get it make sure that you pay your credit card bills on time. This will help you build a good credit history. Once that is done, credit card companies will be more than willing to give you a credit card.