FD-backed Credit Card to Unsecured Credit Card

Here is how you can build your credit history with secured cards and become eligible for unsecured credit cards in the future:

Get a Credit Card Against an FD

The first step in your credit journey is to open a Fixed Deposit (FD) with a bank and apply for a credit card against it. Since this card is secured against your FD, banks do not require a credit history or income proof. The FD acts as collateral which reduces the risk for banks and makes approval almost guaranteed. The credit limit depends on your FD amount and typically ranges between 70% to 100% of the deposit, depending on the bank’s policies. So, choose an FD amount as per your budget and start building credit while maximizing your savings through rewards or cashback.

Use the Card Responsibly

Once you receive your card, start using it for small and regular expenses such as groceries, utility bill payments, and more. Ensure that you use the card only for necessary expenses and avoid overspending so that you can manage timely bill payments. The goal should be consistent and controlled usage of the card. Always pay your credit card bill in full and on time to avoid high interest charges and to build a positive credit history.

Establish Credit History

FD-backed cards work just like regular credit cards, and every transaction or payment is recorded by credit bureaus. Credit bureaus like CIBIL and Experian require sufficient data to generate your credit score. By using your FD-backed card regularly and making timely payments, your credit score typically starts building within 3 to 4 months. During this period, the bank reports your payment behaviour to these bureaus. Hence, it is important to remain consistent with timely payments to build a strong credit history.

Maintain Consistency

As your credit score begins to build, it is important to maintain consistency in both usage and repayments. Use the card responsibly, avoid maxing out your credit limit frequently, and always pay your bill in full and on time every month to build a strong credit profile and avoid high interest charges. For example, if your credit limit is Rs. 50,000, try to keep your monthly spending between Rs. 20,000 to Rs. 25,000. Additionally, maintaining a low Credit Utilization Ratio (CUR) signals to lenders that you are not overly dependent on credit and can manage your finances responsibly.

Build a Strong Credit Score

With timely payments and disciplined usage, you can build a strong credit score of 750 or above, making you eligible for unsecured cards with better benefits. However, you need to be consistent over a period of 6 to 12 months to achieve this. A credit score above 750 is considered excellent and significantly increases your chances of approval for unsecured credit cards.