How EMI Cards Can Help Improve Your Credit Score

Your credit score is more than just a number – it reflects your financial habits and creditworthiness. Whether you are applying for a home loan, car loan, or even a credit card, your credit score plays a major role. If you’re looking for smart ways to build your credit profile while managing your purchases better, then this blog is for you. Read on!

What is an EMI Card?

An EMI Card is a financial product that allows you to convert your large purchases into easy, manageable EMIs. Unlike a credit card, it is usually pre-approved with a set limit and can only be used at partner stores or websites.

How an EMI Card can Help Improve your Credit Score

Using an EMI Card the right way can positively impact your CIBIL score. Here’s how:

•    Build a Positive Credit History: Each time you repay your EMI on time; you show lenders that you are reliable. This timely repayment history gets recorded in your credit report and helps improve your score gradually.

•    Keep Credit Utilization in Check: Unlike regular credit cards, where high spending can hurt your utilization ratio, an EMI Card is used only for specific purchases. This prevents you from overspending and keeps your usage low.

•    Diversify your Credit Mix: Credit agencies look at the type of credit you use. Having a good mix of loans, credit cards, and EMI cards can strengthen your profile. An EMI Card adds to that diversity without adding too much risk.  

•    Helps Build Credit from Scratch: If you are a young professional or someone with no credit history, getting a traditional credit card or loan can be tough. EMI cards are easier to get approved of and help you start building your credit profile step-by-step.

•    Encourage Financial Discipline: By giving you a fixed repayment schedule, EMI cards encourage better budgeting. When you stick to your plan and make timely payments, your score gets a positive push.

Things to Keep in Mind Before Using an EMI Card

While EMI cards are helpful, it’s important to use them wisely. Here are some things you should consider:

Don’t Miss EMI Deadlines
Missing your EMI payments can hurt your credit score and lead to late payment penalties. To avoid this, set up reminders or enable auto-debit from your account. Consistent on-time payments not only help you avoid extra charges but also positively impact on your credit profile.

Avoid Overusing the Card
It’s tempting to use your EMI Card frequently, especially for high-ticket purchases. However, overuse can lead to unnecessary debt and higher utilization, which may negatively affect your credit score. Use the card responsibly and only when necessary.

Check the Terms and Conditions
Always go through the terms and conditions before using your EMI Card. Understanding the processing fees, interest rates, and repayment tenure clearly can help you make informed decisions and avoid surprises later. While many EMI plans offer zero interest, some may include hidden charges that could catch you off guard later. 

Monitor CIBIL Score Regularly
Make it a habit to check your credit score at regular intervals. A timely CIBIL score check helps you track your financial progress, spot discrepancies in your report, and understand how your EMI repayments are influencing your credit score.

To Conclude

An EMI Card is more than a convenient payment solution for shopping; it’s a steppingstone towards a strong credit profile. When used wisely, it can help you build a trustworthy repayment history, diversify your credit mix, and avoid common financial pitfalls. So, if you are planning a big purchase and want to manage it smartly, consider applying for PFIN EMI Card from Poonawalla Fincorp. Get a credit limit of up to Rs 5 lakh with nominal fee and flexible repayment options.

Frequently Asked Questions

Is an EMI Card the same as a credit card?
No, an EMI Card is not the same as a credit card. While both offer credit, an EMI Card is primarily meant for specific purchases and converting them into EMIs, whereas a credit card offers more flexible usage.

Do EMI cards come with interest charges?
Some EMI plans come with zero interest, while others may have nominal interest or processing fees. Always read the terms and conditions before opting for an EMI plan.

Can I pre-close my EMI plan before the tenure ends?
Yes, many EMI cards allow you to foreclose or prepay the outstanding amount. However, there might be a foreclosure charge, so it’s best to check with your issuer beforehand.