Go for secured card, improve score to tackle credit squeeze

Also try for collateral-based loans: Check interest rate, penalties and repayment terms

- HIMALI PATEL

Credit cards and personal loans are becoming harder to obtain with banks tightening access to new credit cards and personal loans amid rising delinquencies. Data from the Reserve Bank of India (RBI) shows a 32.6 percent decline in new card issuances from 920,000 in August to 620,000 in September.

Growth in personal loans has also slowed, with a year-on-year rise of 16.4 percent in September 2024, down from 18.2 percent the previous year, according to the central bank.

Stricter eligibility criteriaWhen credit availability tightens, eligibility criteria become stricter. "You may receive a smaller credit limit, need a higher credit score, and face stricter terms like higher Annual Percentage Rates (APR) and penal charges," says Adhil Shetty, chief executive officer (CEO), BankBazaar.com.

Certain customers may face more challenges in securing cards. "Young professionals or those just entering the workforce, who are new to credit, may find it harder to secure a credit card with a decent limit," says Vivek Banka, co-founder, GoalTeller, a financial planning app.

Navigating the credit squeezeFor individuals with limited credit history or lower scores, Shetty suggests using a secured credit card.

Secured cards, which are issued against a fixed deposit (FD), typically have credit limits of around 90 percent of the FD amount.

"Secured cards operate much like traditional credit cards. They serve as an effective tool for individuals aiming to build or repair their credit scores gradually," says Gaurav Aggarwal, chief business officer, Paisabazaar.