How an FD Credit Card Helps in Building or Improving Your Credit Score

A good credit score is essential for your finances. It makes getting loans, credit cards, and better rates easier. However, you may not get approved for regular credit cards if you have bad credit or no credit history. An FD (Fixed Deposit) credit card can help with this. It is a credit card against FD savings. It lets people with little or no credit build a credit history. Let’s look at how an FD credit card can help improve and develop your credit score.

1. Offer a Starting Point for Building Credit

Limited or poor credit history is one of the main obstacles to getting approved for loans and cards. An FD card allows those with no or inadequate credit to demonstrate responsible use. As you use your FD card responsibly over time, you gradually start building your credit score.

2. Develop Financial Habits

An FD credit card allows you to establish habits like paying your balance on time, keeping credit utilisation low, and monitoring your credit report and score. With responsible use, an FD card enables even those with poor or no credit history to begin building or rebuilding credit.

3. Better Access to Credit  Over Time

Most FD credit cards start with a relatively low limit compared to unsecured cards. However, with timely payments, your credit limit can be gradually increased. You may also qualify for lower interest rates as your credit score improves. Paying all credit card bills on time every month without any delays or missing payments builds a good credit history.

As your history improves, the bank will see you as a serious and reliable customer. So, after 6 months or 1 year of a good payment record, you can request the bank to increase your card limit.

4. Unlocks Better Loan Terms in the Future

The higher your credit score, the better loan terms, including lower interest rates, lenders can offer you. When you apply for credit card (FD) and use it wisely, you lay the groundwork for better credit, opening the door to favourable financing options.

5. Offer a Path Forward

While discipline and prudent use are required, an FD card presents those with poor or no credit as a starting point. Use your FD card to demonstrate sound management until you qualify for unsecured credit.

6. Better Chance of Loan Approval Later

Using an FD card responsibly helps you build a good payment history. When you apply for other credit cards or loans, lenders can look at how you used your FD card. This gives you a better chance of approval.

7. Built-In Spending Limit

With an FD card, you can only charge up to the amount in your fixed deposit. This prevents you from overspending beyond what you have saved. So you avoid getting stuck in debt you can’t repay, unlike with personal loans or overdrafts that let you overspend. The FD card limit keeps you from borrowing more than you can handle.

Conclusion

A fixed-deposit credit card can help build good credit. When the card is utilised responsibly, keeping balances low and making timely payments, it demonstrates positive repayment behaviour to future lenders. This supports access to credit by strengthening one’s credit profile.  Maintaining sound financial habits allows greater flexibility in qualifying for loans, cards, and other financial instruments needed down the line.  The prudent use of an FD credit card makes way for a stronger economic future.