hi all,
I have never owned a credit card before and am looking to buy a house next year. Is having a credit rating really that important to being able to get a home loan? Or is your income and assets enough?
Cheers
Is it worth getting a credit card for a credit rating?
spacemansam on 30/03/2011 - 22:45
Comments
If you have a mobile phone on a post-paid plan you already have a credit rating
+1
Credit Cards are a slippery slope…
I didn't need a Credit Card to get my home loan. It may help even not to have one! I recently enquired about a new Home Loan and they asked for the Credit Limit on my card… I suspect the credit limit may have been subtracted off the maximum I could borrow! (mostly cause I was surprised how little they'd let me borrow)
I never had a proper credit card until last year when I got one to simplify hire-cars for a trip (I learned from my last trip that they take a sizeable deposit ~$1000 out of your Debit card if that's all you have).
I thought I'd use it only for the trip and only for securing hire-cars, but have used it every month since! Not out of any great need, just because of the little bonuses you get, namely 12 months extended warranty (probably not worth the paper its printed on) and Insurance cover.
I'm still paying it off within the Interest Free period, but I know many people who would just start buying stuff they couldn't afford. It's so easy to do when you have the card burning a hole in your wallet…
When I bought my house, I did not have a credit card. There were no issues with credit history. If you have a telephone connection and utility connection, that creates your credit history too. Having too many credit checks may go against you. As Sahadowsfury said having a credit card, even if you don't have anything outstanding will reduce your debt servicing capability. Bank reduces the minimum payment of your entire credit limit to arrive at your servicing capacity. It does not matter to them it you don't owe anything on the card.
There you go.. having a card probably did reduce my borrowing limit!
I have several credit cards, some I use regularly and some I don't use unless there is a promo e.g. interest free.
When we applied for a home loan the lender did not mind that we had multiple cards, but they did want to see the history of those cards to determine if they were a credit risk.
Not all banks / lenders will do this, and most as pointed out above will assume the worst case, that is you will spend to your limit and lend accordingly.
In saying that some lenders will also overestimate what you can borrow, and if you do the sums you'll find you will struggle with repayments if interest rates rise even by 1%
Wow guys! Really had no idea about all this. Was tempted to get Amex cause im part of the apa so there is no annual fee but wont be getting one now. Thanks for the advice all!
I doubt that there is any such thing as a positive "credit rating". The only thing that they care about is how much you owe, and if you have ever defaulted on any loan or payments. Not having a credit card would be a positive.
Yep, people see the American credit system and assume ours is the same. You're either all good, or have negatives working against you. There's no good, great and fantastic. No credit rating = a good credit rating.
No credit history however can result in a rejected credit application by some companies.
For what though? Credit Cards, mortgages and mobile phone plans can easily be done without one.
Who exactly requires a credit history in Australia?
The amount available on your credit card will be stiff all in relation to your home loan. You don't have to accept a high credit limit and you can decline to take future ones. I pay my credit card bill in full every month and have about 350,000 qantas frequent flier points banked up for my little one's first trip to europe.
You can request a free copy of your credit report to see what is on it here…
http://www.mycreditfile.com.au/mcf/products/details/my-credi…There is no such thing as "building your credit rating" in Australia, only "destroying your credit rating". I believe the idea of building your credit rating does apply in the US and their discussion of the issue is overheard by Aussies, so it gives people false ideas. Been calls to change to a similar positive rating system here but hasn't happened yet.
Yes agree. The Australian system is very anti consumer. It does not record a consumers actual financial discipline. For example, if you apply to one bank for a home loan, and they do three credit checks for one application then its is three inquiries on your file. Why would they do that. NAB actually did three for me. One by the branch, which didn't do anything after that. I complained to their call centre, they did two checks for two different applications one for refinance and one for investment finance. Why would they do that, the credit report is valid for 15 days and as their interest rate was lower, they took a long time to process the application. In the end I did not go with them as got a better offer than what NAB offered.
Result would be next time I apply for credit the new inquiry would see three previous inquiries by NAB and assume a decline of credit. It does not allow me to record that I declined their offer.
Hence I say it is an unfair system.
Yep, I have 5 credit checks over the last 6 months, all for enquiries, NOT wanting a loan or new CC. Now I've been rejected for a debt consolidation loan based on that. Bloody annoying.
Why is there a - ve for Ashlea?
Either and idiot or an accident, I balanced it anyway ;)
I get -ve on anything I say. :P
Just remember the bank might even hold it against you if you have a credit card by lowering the amount you can borrow when you have credit cards (because technically CC's are unsecured loans up to your CC limit, so the bank might take that into account as well).