Will an Oz Credit Card build up credit history?

[Guest Hearne_Family]

Hey Guys,

 

Stupid question but if I get an Oz Credit Card will it help build up my credit history? I am on a 457 Visa and plan to switch to PR and looking to the future I plan to buy a house over here, if I get a Credit Card now and use it weekly for the food shop and then pay the whole balance off straight away will it be better for my credit rating than just using my regular bank account?

 

Terry.

[Guest proud2beaussie]

I think you should understand that the concept of a good credit rating doesn't really exist in Australia,in Australia the only thing that is recorded on your credit file are applications for credit,approvals of credit and payment defaults etc,you don't really get a "good" credit rating here but in essence yes if you are granted credit and don't have any late payments etc then if you make a future application the people you apply to would be able to see that you haven't got into trouble and would probably view that favourably but we don't have a credit rating system like you have in the UK.

Hope this helps.

Cheers

Edited to add that your plan sounds like a good idea-if you can get a credit card on a 457,go for it.

[Guest Hearne_Family]

Thanks Nigel, glad you cleared this up for me, ANZ have approved me for a credit card I was just wanting advice before I went for it, basically what you are saying is that it may not help in terms of my future plans but in the same light it wont hurt

[Guest proud2beaussie]

Yep,it's good that you have been approved,it certainly won't do any harm and like I said if you pay it off on time then any future applications you make will allow them to see that you haven't had any late payments and they would take that into account,but you don't actually get a "Good" rating as in the UK.

There has been discussion for the last few years about introducing a UK type system here but nothing has been done yet.

[Guest The Pom Queen]

Hi Terry

Nigel is correct about there not being a good credit record here.

So to get a mortgage there is no need to take out a credit card. One thing to remember is that unless you are going to take the mortgage with the same bank (ANZ do some good mortgages at the minute) then having a credit card can impair how much you can borrow when you come to get a mortgage. I know I have spoke to quite a few mortgage lenders about this and they say that it isn't even how much you have outstanding on your card, it is worked off how much your limit is. I know I posted a link on here sometime last year I will try and find it, but it took quite a lot out of how much someone could borrow if they had a credit card.

One link I have to hand although it isn't the one I want to find for you is this one: Home loans - How much can you borrow?

 

"There is no firm and fast rules as to how much a home loan provider will lend you based on your income. It’s not as simple as X times your salary.

A mortgage lender will look at your bank statements and your regular outgoings and calculate how much they will lend you. If you run a tight ship with regard to your finances, you may be able to get a bigger mortgage than someone with missed payments and outstanding debts. Conversely, if you've large credit card limits and personal loans, you will not get offered as much.

It’s important to note that your credit card limit is what is taken into account in calculating your affordability, not the actual amount owing on your credit card. One way of increasing your maximum level of borrowing is to ask your credit card company to reduce your credit card limit or cancel your cards altogether"

[Guest proud2beaussie]

I take Kates point about how mortgages are approved but some banks,including the ANZ actually offer home loan products with credit cards included after approval,I have had a mortgage like that in the past and I was told that my mortgage would not have been approved without having a good payment history on my existing card.

[Guest The Pom Queen]

Hi Terry

Typical I cannot find the link that I had that actually told you that if you have a credit card how much it would reduce the amount you could borrow by, it was a great link to. Oh well nevermind, here are a couple more that explain:

 

Mortgage Borrowing Capacity: MFAA: Mortgage & Finance Association of Australia

 

"In the eyes of a Lender, the higher your credit card limit, the more chance you have to get into financial difficulty. So, if you want a simple way to increase your borrowing limit, get rid of any surplus cards, and reduce your credit card limit to the absolute minimum you need"

 

Home Loans: The Secret How to boost your borrowing power - RateCity.com.au

 

"Australians love credit cards. We have nearly 13.5 millions credit card accounts in the market, with an average credit limit of over $8,000. The unprecedented increase in credit card debt has increased household debt, and Australia now has an average debt of $3,000 per credit card. Credit cards have become a convenient, everyday tool for managing consumer finance.

Many astute investors may be aware that even if you don't have any debt on your credit, the fact that you have a high limit on your plastic will reduce your borrowing capacity. Mortgage lenders will always assume that a credit card is a loan that is available for you to use at some stage of your life. This is why lenders always ask for "total combined limit on your credit cards" instead of "total debt on your credit cards" when you complete a mortgage application.

Then the next question would be: how do lenders determine the portion of your net disposable income which has to be put aside for your credit card debt? With minimum monthly repayments on credit cards ranging from 1.5% to 5%, most lenders will use 3% of your total credit card limit as the debt commitment that is attached to your loan application"

 

It may only reduce the amount you can get on a mortgage by a little, but sometimes we may need just that little bit extra to get our dream house.

Kate

[Guest The Pom Queen]

I take Kates point about how mortgages are approved but some banks,including the ANZ actually offer home loan products with credit cards included after approval,I have had a mortgage like that in the past and I was told that my mortgage would not have been approved without having a good payment history on my existing card.

 

Hi Nigel

You are quite right and I am no financial advisor:wink: From what I have gathered is that if you have a credit card with the same bank you take the mortgage with then this is looked at favourably as you say. So if Terry get's a mortgage with ANZ it should be fine as they like to see how you can manage your finances with them. However, as far as I am aware, he doesn't need to get a credit card just so he can apply for a mortgage at a later date, if he wants a credit card for other reasons then that's fine.:wubclub:

[Guest proud2beaussie]

Hi Kate,

I understand what you are saying and agree with you.

Cheers

[Guest Hearne_Family]

The main reason was to get a good credit rating but as there is no such thing then its not really a big deal, I think I will still go with it anyway as the ANZ do seem to have good mortgage deals and if it wont do me any harm then I will go for it, it will only be used for small amounts and paid off immediately...no getting into debt this time, done that and dont want another t-shirt!!

[Guest The Pom Queen]

The main reason was to get a good credit rating but as there is no such thing then its not really a big deal, I think I will still go with it anyway as the ANZ do seem to have good mortgage deals and if it wont do me any harm then I will go for it, it will only be used for small amounts and paid off immediately...no getting into debt this time, done that and dont want another t-shirt!!

 

It may be worth cancelling the card when you come to get a mortgage.

ANZ do have some great mortgage deals at the minute and we are considering changing over to them soon.

[Mongrel]

The main reason was to get a good credit rating but as there is no such thing then its not really a big deal, I think I will still go with it anyway as the ANZ do seem to have good mortgage deals and if it wont do me any harm then I will go for it, it will only be used for small amounts and paid off immediately...no getting into debt this time, done that and dont want another t-shirt!!

 

 

IN my personal experience when you go for a mortgage esp with keystart WA , they look at everything , when we were on 457 we applied for a couple of credit cards but did not take them up just applications , had a letter from mortgage company wots this and that etc this credit card , it was only an application but was on file

[Guest errol flynn]

Some great tips on credit cards and mortgages. Good to know! :biggrin:

 

One question I was going to ask regarding credit cards is if it is worth getting a new interest free credit card in the UK before traveling out to Oz, ACT specifically though I don't see how it would matter.

 

I can transfer some UK funds to Oz though the exchange rate isn't the best it's been! I'd thought that interest free credit from the UK could be a buffer. I will have some UK funds and would pay the card off within the interest free period so no worries there.

 

Anyone got a view on this approach? Opinions are always welcome. :notworthy:

 

Kindest regards

Errol

[pez2008]

Some great tips on credit cards and mortgages. Good to know! :biggrin:

 

One question I was going to ask regarding credit cards is if it is worth getting a new interest free credit card in the UK before traveling out to Oz, ACT specifically though I don't see how it would matter.

 

I can transfer some UK funds to Oz though the exchange rate isn't the best it's been! I'd thought that interest free credit from the UK could be a buffer. I will have some UK funds and would pay the card off within the interest free period so no worries there.

 

Anyone got a view on this approach? Opinions are always welcome. :notworthy:

 

Kindest regards

Errol

 

Ive still got UK credit card and have money in my Uk bank account that pays it monthly. I just notified them i was emigrating and then my change of address, it was fine.

[Guest errol flynn]

Thanks for the feedback Pez. How good/bad do you find the transaction charges compared to a local loan or overdraft? Any thoughts?

 

Kindest regards

EF

[pez2008]

Thanks for the feedback Pez. How good/bad do you find the transaction charges compared to a local loan or overdraft? Any thoughts?

 

Kindest regards

EF

Cant really say as i have only been here 6 months and dont know anything about loan rates or overdraft fees. Just used it a couple of times on small amounts to see it worked ok. I would guess the ex rate wouldnt be to favourable. I personaly would only use it for emergencys and i am in the process of applying for a Ozzie 1.