Should I Build up My Credit Rating While Young?

• 

  [Deactivated] on 21/01/2017 - 21:00

  +1

  Yes but just remember this

  1. No credit rating is usually looked upon worse than someone with a great credit rating

  2. Start by getting a phone on a contract or a low no fee credit card, build up your repayment history and the bank will increase this limit over time

  3. Once you build positive credit lenders will see you as a good repayment client and offer better rates

  4. Often no credit histories get declined with Telstra, try prepaid for a few months before porting over and you will usually have more success

  Risk factor is based on how much credit you have currently, what is extended to you by credit providers and your credit limits etc
  I have seen people knocked back with 50000 credit cards for personal loans due to an overextension of credit meaning borrowing could be an indication of trouble

  Credit scores are really a joke in Australia but by being smart and managing your money / repayments, build yourself a good history and you will be rewarded with better rates, the ability to get a loan during a rainy day, banks will see you as a favourable client and extend a bigger line of credit, disipline is the first rule with credit

  Treat it like anything else, don't use more than what you need and make sure you make the repayments, more than the minimum if you can

  Store cards like GO Mastercard might even be ideal with a small $2000 limit to make a purchase on but a low rate bank card with your bank shouldn't be an issue once you're 18 and have a good banking history with them

  Good luck :)

• 

  bluesky on 21/01/2017 - 21:41

  +2

  Are you a tertiary student? Some banks offer credit cards specifically tailored to this segment, so eligibility requirements etc are easier to meet. E.g.,

  • CBA student card
  • ANZ First Student

  Ideally, one which is free, or free if you spend a small reasonable minimum per year. So that it costs you nothing.

  Edit: Just found from your previous comment - since you are a tertiary student, such cards will apply to you.

• 

  djkelly69 on 21/01/2017 - 21:59

  +2

  Do banks actually look at your credit history for a home loan?

  OP, I would not worry about it - if you are like most people, you will end up taking out a few credit contracts in due course (phone contract, car loan, personal loan, etc). Work on building a big deposit rather than taking out loans.

  • 

    [Deactivated] on 21/01/2017 - 22:26

    Banks and any one providing you credit will always check your file
    It is how they define your "risk" and either approve or deny you

    Building a good history is important from a young age

    • 

      djkelly69 on 22/01/2017 - 00:08

      +3

      I think for a mortgage they look at a lot more important things than credit history, like income, employment, value of security, etc.

      • 

        [Deactivated] on 22/01/2017 - 11:07

        Not really when the decision is based on your credit file

        I don't know how people can think a bank is not going to do a credit check when applying for any service with them

        The only company that does not do a check is Telstra once you have been a customer with them for a number of years and they do internal checks rather than external checks

        Credit file is probably one of the biggest factors which influences banks to loan money to anyone and I stand by my original comment

        A good credit history will yield better rates and results than an average one
        Time and time again this has been shown to be true

• 

  Mumbles on 22/01/2017 - 11:05

  +1

  While you are young its more important learn financial literacy and investments than getting into debt.

  Ability to lower your home loan interest rate depends more on your haggling skills, level of income, your equity, collateral/security, cross-collateralisation, your other debts/liabilities/encumbrances, etc

  A lack of credit history won't stop a bank manager approving your home loan or car loan. Remember that these are lower risk loans because they have collateral. All that a lack of credit history will do is make the bank manager raise an eyebrow and telephone you to ask why you have no record. Just explain your personal circumstances and history (eg. young person, good saver, never needed to borrow). Heck, if you are financially literate you can get a bank manager to drool over the opportunity to loan you money (eg. investment returns, taxation/packaging, financial planner).

  • 

    eclaw on 22/01/2017 - 12:23

    If OP is financially responsible and literate then it makes even more sense to build a credit history.

    A good credit score only works to your benefit.

• 

  Architectonic on 22/01/2017 - 13:30

  +1

  Australia does not have "credit ratings" like they do in the USA. Our "credit report" only reports when we apply for credit (eg a CC, loan etc) and when we have been denied credit or defaulted on a bill.

  Taking out a personal loan will not improve your credit worthiness. Likewise, unless you have failed to pay your bills and can only get credit from a dodgy lender (which only offer at higher rates than normal lenders), it will not impact the interest rate you are offered.

  Applying for a credit card is not a terrible idea if you have sufficient income. But remember, unlike in the US where they have "credit ratings", it is best to spend only as much as you can afford and pay it off in full every month - getting into the habit of being able to manage your finances and credit is the biggest benefit you will gain.

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  Gunther on 23/01/2017 - 12:47

  +5

  Don't bother.

  I obtained a $500k loan with a $20k credit card at age 25. No history of credit, not even a phone plan.

  Savings history is more valuable, shows you have the ability to repay a loan.