How to use a credit card?

Upon approving an application, the bank provides a physical card and a PIN to a customer. The card and the PIN are sent to the customer through two different couriers to remove the chances of any kind of fraud by the courier personnel. A customer is allotted a credit limit on the card which can be used by swiping the card physically to make purchases or using the card online. Each card also has a cash limit, which is a portion of the total credit limit. This refers to the amount of cash that the customer can withdraw from any ATM using the credit card. The customer has to use the PIN for using the card in any of the above scenarios. The PIN negates the chances of misuse of the card, should it fall in the wrong hands.

What is a credit score?

A credit score is a number associated with an individual that relates to his/her debt repayment habits. It helps banks and lenders to decide whether they will approve a loan or advance or a credit card in his/her favor.

This is done worldwide in almost every country for its citizens. In India, the agency which calculates and publishes the credit score is called Credit Information Bureau (India) Limited or commonly CIBIL. It publishes a 3 digit CIBIL Score for individuals which is the credit history of an individual. It includes the credit repayment history of the individual across all loans and across all institutions. The score is calculated considering various factors such as the number and types of loan accounts held by someone, payment history, number of outstanding loans, and others.

CIBIL generates a CIBIL report for individuals which contains a comprehensive overview of all loans taken by a person. It also contains the loans for which an individual has signed as a guarantor.

While granting loans, banks take the CIBIL score into serious consideration.