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Secured Credit Cards – Repair CIBIL Score

Secured Credit Card
Secured Credit Card

Secured Credit Card is a Blessing in Disguise. Why i said this because Life is unforgiving and so as Poor CIBIL Score / Credit Score. Once an individual is in this sad situation, it is very difficult to come out. A borrower is at the mercy of a lender for CIBIL Score. There is no place for human emotions in the mortgage industry. In many cases, i observed that there was “No” intent of a borrower to default on payment. Such a default is also known as non-willful default. The irony is that both willful and non-willful defaulters are being beaten with same the stick. In case of non-willful default, the intention of a borrower is to clear the dues but he just need a little support to put his financials back on track. Banks and financial institutions treat him like a criminal. In such cases, CIBIL Score can be easily spoiled but it may take years to repair the CIBIL Score. It reminded me of my childhood days. We used to spend hours to build a house from clay, mud etc, but some “bully” kid used to destroy it within few seconds. Same is the case with CIBIL Score. You spent years to build, but it can be destroyed within few months. I am not saying it is only because of a bank but customer is also equally responsible.

We cannot blame or fix 100% responsibility of the banks. As a borrower, we should follow credit discipline and plan for unforeseen circumstances in life. Still it is not possible to foresee every unforeseen circumstance. As i mentioned that banks should be a bit lenient towards the non-willful defaulters. There should be completely different CIBIL reporting mechanisms for non-willful defaulters provided bank is convinced about the same. At the end of the day, too strict credit regime will decrease no of potential borrowers in the system which will impact the business of the banks in the long run. More and more entry barriers will reduce no of potential borrowers. Too much compliance’s are not good for any industry or sector. It kills the sector as such or it may lead to a scenario when almost everyone start flouting the rules. Best example, i can think is of  Value Added Services offered on Mobile. Too many compliance’s / entry barriers killed this golden hen. I subscribed to financial news and stock alert but then stopped using due to double opt in etc. Thankfully, mobile apps replaced the SMS service. The second example is of Wealth Tax, due to too rigid compliance, non-compliance was common. Too strict compliance on credit approval process will kill the concept of credit, it is not good for both banks / financial institutions and growth of the economy. Non-willful defaulters should be treated separately and 2nd chance should be given to the defaulters to repair the CIBIL Score. In my post on 5 Tips to Improve CIBIL Score, i highlighted general tips to improve CIBIL Score. Currently, there are not many options to repair CIBIL Score except Secured Credit Card and few others.

Secured Credit Cards – Fact Sheet

In my opinion, Secured Credit Card is best suited to repair the CIBIL Score. Secured Credit Card can be correlated to Home Loan. As Home Loan is backed by Collateral i.e. Property is Mortgaged similarly Secured Credit Card is backed by Fixed Deposit. One of the misconceptions is that good CIBIL score is required to avail Secured Credit Card. It is not true as Secured Credit Card is backed by security like Fixed Deposit therefore banks don’t check CIBIL Score before they issue Secured Credit Card. In other words, we can say that Fixed Deposit Amount is mortgaged to the banks, therefore, there is no need to check Credit History. Moreover, the risk is very less compared to Home Loan which is high value purchase. Secured Credit Card is also known as Credit Builder by some of the banks. It’s a win-win situation for both banks and the individual. Banks get double business i.e. Fixed Deposit and credit card whereas an individual can build a good credit score. Functionality wise it is as good as Debit Card only i.e. you can only use the money available in your account.

Banks offering Secured Credit Card: ICICI Bank, Axis Bank, SBI Dena Bank etc. SBI Dena Bank card is issued against Fixed Deposit in Dena Bank.

Fixed Deposit Amount: Most of the banks define minimum fixed deposit amount before they issue Secured Credit Card. This amount is Rs 30,000 for SBI Dena Bank Card whereas ICICI bank issue Secured Credit Card with min FD value of Rs 20,000.

Credit Card Limit: Credit limit of Secured Credit Card also vary from bank to bank. ICICI bank offer max credit limit i.e. 85% of Fixed Deposit Value as a Credit limit. Lowest is 50%.

Fixed Deposit Interest Rate: Bank offers interest rate as offered to regular fixed deposits.

Fixed Deposit Tenure: Vary from bank to bank but normally it is 2 years. ICICI bank offers minimum tenure of 6 months

Liquidity of Fixed Deposit: Bank will put a lien on the Fixed Deposit linked to Secured Credit Card. In short, you cannot withdraw Fixed Deposit. In case of a default in payment on Secured Credit Card, Bank will liquidate the fixed deposit to recover the amount due.

Charges: Banks charge joining fees, annual fees, processing etc to issue Secured Credit Card. Please compare the charges before finalizing.

Documentation: For Secured Credit Card, minimum documentation is required. Banks need only identify proof. Income Proof is not required. If you have existing relation with the bank then no documentation is required.

Important Points

1. No Credit History: Not many people are aware that besides CIBIL Score repair, Secured Credit Card can be used to build credit history from scratch. In many cases, loan of a potential borrower is rejected because there is no credit history. In case of “No Credit History”, CIBIL Score will show NA or NH. Banks inform the customer that CIBIL Score is low, but it is not the case. It’s an irony that no one lends, an individual cannot build credit history till someone lend. Therefore, Secured Credit Card will come to your rescue.

2. Use and Pay on Time: Once you get Secured Credit Card, make a point to use it on the regular basis. Most importantly, make all payments on time. Any default on payment can further damage your CIBIL Score. Always make a point to utilize max 30% of credit limit else it shows credit hungry behavior. For example, if your Fixed Deposit is of Rs 1,00,000 and Credit Limit is 85% i.e. Rs 85,000. In this case, never utilize credit card for more than Rs 25,500 i.e. don’t spend more than this amount through credit card

3. Secured Credit Card should be reported to CIBIL: In many cases, i observed that banks don’t report the Secured Credit Card to CIBIL database. In one of the case, a client was using this card for more than a year. After 1 year, he realized that it was not reported to CIBIL. Therefore, it is mandatory to check your CIBIL report after 60 days from the date Secured Credit Card is issued. If the details are not reported to CIBIL then you can request the bank to report the same. If it is not reported to CIBIL then whole objective behind Secured Credit Card is defeated.

 4. Don’t expect overnight results: Yesterday morning i received a call from one of my client. 2 months back, i suggested him to get Secured Credit Card to improve CIBIL Score. He told me that his CIBIL Score is still the same. Summary is that don’t expect overnight results. A good credit behavior followed for 18 months to 24 months will yield the results. Reason being, CIBIL reports the credit behavior which has to be established.

Hope you liked the post !!!

To avail personalized consultation on How to improve CIBIL Score, You may CLICK HERE.

Copyright © Nitin Bhatia. All Rights Reserved.

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Abhi
Abhi
9 years ago

My dad “settled” a loan of around 4 lakhs 6-8 years ago and was a guarantor for his friend who messed up around the same time 6-8 years. Since then he has never taken any loan nor have we applied for any CIBIL score.He has no loan, no credit card for past 7-8 years.The score came as a surprise 785! with no mention of those past accounts and loans. But there is one strange thing in it. There is a 7 lakh auto loan on his name in 2014 which shows as settled in 6 months itself. When I asked him about it, he says its impossible, he never applied and paid for any such thing. And there is one 8.50 Lakh auto loan enquiry. That’s it. Do I raise a dispute and get the 7 Lakh thing corrected? But I think that is the one making his score shoot :p. Confused

Sagar
Sagar
9 years ago

Hello,
What will happen if I foreclose my FD when I have secured it?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Sagar

A bank will either close credit card to convert to regular credit card depending on your usage.

Sagar Vaidya
Sagar Vaidya
9 years ago
Reply to  Nitin Bhatia

Thanks for the reply :)

parul
parul
8 years ago

i got a credit card from sbi and bill was for rs8000 i settle the account for rs2000, after that i applied for new credit with other bank my application got rejected,when i checked my cibil score it was NH,how i can improve my cibil score please help.thanks.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  parul

You may apply for secured credit card as i shared in this post.

parul
parul
8 years ago
Reply to  Nitin Bhatia

how can i apply for the secured credit cards.
thanks

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  parul

You may approach bank with your savings account and request them to open FD and issued secured credit card linked to FD. Link FD to your savings account. All leading banks provide this facility.

parul
parul
8 years ago
Reply to  Nitin Bhatia

if i take secured credit card against FD,will it improve my credit rating as currently it is NH and hw much time it will take.
Thanks

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  parul

It will help to build a credit history. The score will depend on the usage, repayment etc. You need at least 6 months. Also ensure that bank report secured Credit Card in CIBIL.

Arvind gr
Arvind gr
8 years ago

Hi sir, i dont have CIBIL score and my friend has HDFC credit card and he has good credit score so if he agrees to refer me to get the credit card will bank give me the credit card on my friend’s guarantee.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Arvind gr

It is not feasible. The credit card is issued based on the risk assessment of the cardholder.

Pawan
Pawan
8 years ago

I want to apply Secured Credit card ? but need if my contact number and address will be updated in CIBIL .

Reason for asking this is ….there is an organisation whose reportution is not good , they take feedback from CIBIL and ask for previous defaults and that too with 500% interest .

I applied for BajaJ Finserv EMI card at evening ….although it was rejected …but next morning i got a call from these people and they harraased me .

Please let me know if these people will come to know about my number and address once i apply secured credit card ?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Pawan

It is not clear whether you defaulted on any loan in past or not.

Irshad Ahmad
Irshad Ahmad
7 years ago

Sir my cibil score is 543 while i have a outstanding of 65000 towards hdfc personal loan. Now i want to settle the amount and close the personal loan. Will my cibil score improve in 2 months?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Irshad Ahmad

Settlement will not help in improving your CIBIL Score. You may ask for CIBIL masking. Also it will take min 6-9 months to improve CIBIL Score.

Irshad Ahmad
Irshad Ahmad
7 years ago
Reply to  Nitin Bhatia

Thank You Sir.

Nitin Bhatia
Nitin Bhatia
7 years ago

Unfortunately without clearing this account, your credit score will not improve.

Arbind Kumar
Arbind Kumar
7 years ago

hi sir
today i recd a email from Aditi K,Deputy Vice President ,Retail Portfolio Management – Credit
Cards( hdfc bank ) stating that

This is in continuation to our e-mail dated 03/04/2017 regarding the status of your credit card account bearing number 517635XXXXXX8327.On receipt of your e-mail our Bank
Representative had contacted you to address your query. As clarified in our discussion, we re-affirm that due to continuous non-repayment towards the card dues, your credit card was invalidated from further usage.

As on date there is an outstanding of Rs.5,254.00 dues pending on your card account and request to remit payment immediately to enable us issue NOC and for the status of your card
account to be updated in the CIBIL database.

dear bhatia sir
now i want to know from you that should i trust and pay them to clear cibil (written off) ? and plz suggest me what i should need from them

arbind kumar

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Arbind Kumar

From the bank communication, it is not clear what will be card status in credit report post closure. Please clarify the same from the bank. In my opinion, it will be Post (WO)
Settled.

Arbind Kumar
Arbind Kumar
7 years ago

Dear Bhatia Sir

As per your suggestion I have replied the bank with belove statment.Am i right ?Is ‘PriorityRedressalRPM.CreditCards@hdfcbank.com’ is right person to conversation ? i have also forwarded this mail to Principal Nodal Officer Mr. Appala Pranesh Rao
at HDFC Bank at email id pnohdfcbank@hdfcbank.com

Dear Sir

Thanks a lot for your reply and seeking the best support in future also.As per
your email reply I am agree and ready to pay the outstanding of
Rs.5,254.00 dues pending on my card account.Actualy I want to draw your
kind attention that specifically I am looking for CIBIL Masking of the my
card account outstanding.
I have some querries it will be my pleasure if plz share your thought

1. What are the
detailed terms & conditions of CIBIL MASKING of hdfc bank

2. how
my account will be reported to CIBIL after all the dues as demanded by the bank
are cleared

3. Is
HDFC BANK promises to remove Written-off or Settled Status regarding my account
from the CIBIL Database.

4.
how many days, the bank will report to CIBIL
from the date of payment.

5.
How
much,in which mode and where to pay the payment

Thanks
& Regards

Arbind Kumar

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Arbind Kumar

In my opinion you should communicate only with Nodal officer. Your communication seems to be okay.

Arbind Kumar
Arbind Kumar
7 years ago

Dear Bhatia Sir
i recd an email from Aditi K,Deputy Vice President,Retail Portfolio Management – Credit
Cards( Emal id.: PriorityRedressalRPM.CreditCards@hdfcbank.com )

Stating as below,plz suggest what shoul i do

Dear
Mr. Kumar,
This is in continuation to our e-mail dated 12/0/2017 regarding your credit card account bearing number 517635XXXXXX8327.On receipt of your e-mail our Bank
Representative had contacted you to address your query. As clarified in
our discussion, we re-affirm that there is an outstanding of Rs.5,254.00 dues pending on your card account. We request to remit payment immediately to enable us issue NOC towards your card account. Post receipt of the said payment, the status your card will be updated as blank in your CIBIL report with current and overdue balance as NIL.We take this opportunity to inform
you the various mode of payments available for your convenience to effect payment towards your credit card.
Cheque :
To ensure convenience for making payments we have placed the cheque drop
boxes in all our branches and branch-ATMs. All you need to do is to drop in
your payment cheque at any of these boxes. (Please mention your 16 digit credit
card number)
Netbanking :
This facility allows you to pay your
credit card bills from your desktop wherever in the world you may be. If you
have registered for netbanking, just click on the payment option on our
netbanking facility, mention your credit card number and transfer the amount as
desired.
ATMs :
Through this facility you can
transfer the bill amount from your savings or current account to your credit
card account using the funds transfer option.
NEFT :
We wish to inform you that
NEFT (National Electronic Funds Transfer) has evolved as an
alternative payment mode. It would take 1-2 days for the payment to credit
into the card account provided the other bank participates in NEFT.

We request you to effect payment according to the details provided below:
Name of the beneficiary bank : HDFC Bank Limited
Name of the beneficiary: Beneficiary name
Account number of the beneficiary:Credit card no (16 digits)
Remarks or description : Payment for month /yy
IFSC code: HDFC0000128
HDFC Bank location – : Bank House
HDFC Bank branch corresponding to
HDFC0000128 – : 8,L.B ROAD , THIRUVANMIYUR
HDFC Bank account type – 52
HDFC Bank account number – You can
mention 16 digit card number (Please prefix 00 to your 14 digit Diners Club
Card Number).
Billdesk :
This facility allows you to pay your HDFC Bank
Credit Card bill with another Bank account.

Click on the below link to follow the steps and make payment.

Arbind Kumar
Arbind Kumar
7 years ago

Dear sir i have recd an email below from Aditi K ,Deputy Vice President ,Retail Portfolio Management – Credit Cards

Dear
Mr. Kumar,

This is in continuation to our
e-mail dated 12/0/2017 regarding your credit card account bearing number
517635XXXXXX8327.

On receipt of your e-mail our Bank
Representative had contacted you to address your query. As clarified in
our discussion, we re-affirm that there is an outstanding of
Rs.5,254.00 dues pending on your card account. We request to remit
payment immediately to enable us issue NOC towards your card
account. Post receipt of the said payment, the status your card will be
updated as blank in your CIBIL report with current and overdue balance as NIL.

We take this opportunity to inform you the
various mode of payments available for your convenience to effect payment
towards your credit card.

Dear Bhatia Sir

Plz Suggest me what to do

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Arbind Kumar

It is not clear what will be status in Credit Report. Bank is avoiding the que as i suggested in my earlier comments.

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