Bec_n

Hi everyone,

I intend to buy my first home. Do I have a better chance of my loan application being approved if get a credit card and maintain a good credit history before I apply for my home loan?

I have always used a visa debit card, have never applied for a "credit" credit card, but I am considering applying for one if it helps me getting a loan.

Thanks for all the inputs in anticipation.

Cheers Bec

canadaeh

It won't help or not help you get a loan.

Your credit card payments etc wont be on your credit report.

In Australia your credit report only shows applications and defaults. Not your payment history etc.

If you have very applied for any form of credit in Australia (mobile contract etc) then you will have "activated" your credit report. All applications, defaults WTF stay on your file for 5 years.

If you have never applied for any form of credit here then you don't have a credit report, to get one activated just apply for something - you don't have to accept it.

For home loans banks mostly look at deposit and regular saving history, good employment and stable address. They will of course look at your credit report to make sure no defaults have been recorded, also it can be a problem of you apply for too many things in a short amount of time and have lots of applications (remember your report doesn't show if you got it or took it etc it just shows you applied for it).

spottydog

The limit on your credit card (not the balance) will reduce the amount you can borrow on a mortgage. If you apply for a credit card just before applying for a mortgage you could also find you get a negative scoring for having 2 credit applications close together. Paying a credit card off monthly will have no credit rating and no benefit for a mortgage.

Jilliebee

We don't have any credit cards and had no problem getting a mortgage. We'd only been in Australia 11 months x

Bec_n

Good to know

KJCherokee

I have a credit card which is linked to my current account: each month the bank looks to see how much money is about to become liable for interest and transfers that amount from current to card, so I never pay any interest and get the "up to 55 days" interest free period on all purchases. This saves me excess transaction charges on the current account and ensures that in an emergency I can access funds up to the limit of the card.

I also have an Amex card (for which I am not charged any annual fees) which I keep purely to ensure that I can access up to $15,000 in an emergency: I keep this in case anything goes seriously wrong when travelling.

There is nothing wrong with having credit cards as long as you realise that you have to pay the money back eventually and that they are the most expensive way of borrowing money you can find (well, maybe not quite as expensive as the loan shark down the road). Used sensibly they can actually save you money.