Unlike other countries such as the US and UK, credit card providers in Australia don't really offer dedicated credit builder credit cards. Therefore, the best credit card to build your credit history is the one that you will get approved for, and which you can successfully pay off on time each month.
Owning a credit card does not directly affect your credit score. But the way you use your credit card can definitely affect your credit score, directly, or indirectly.
When you open a new credit card, you have an opportunity to reduce your credit utilization ratio — since your credit line is being increased — and improve your payment history. Both of these things can help provide a boost to your FICO® Score.
For bad ratings resulting from late payments, you can rebuild your rating by making consistent timely payments to your credit cards. You can also use the secured credit card to help rebuild your credit. Paying for things like rent, mortgage, and utility bills in time may also help rebuild your scores.
Illion: Good – 500-699; great – 700-799; excellent – 800-1,000.
What's the average credit score in Australia? The average credit score among Australians is 846 according to credit reporting company Equifax. That means on average Australians have a 'very good' credit score.
It usually takes a minimum of six months to generate your first credit score. Establishing good or excellent credit takes longer. If you follow the tips above for building good credit and avoid the potential pitfalls, your score should continue to improve.
There are several actions you may take that can provide you a quick boost to your credit score in a short length of time, even though there are no short cuts to developing a strong credit history and score. In fact, some individuals' credit scores may increase by as much as 200 points in just 30 days.
Experian®, one of the three major credit bureaus in the U.S., explains that “you'll need to have an open and active account for three to six months before a credit score can be calculated.” Although it can take months to build a good credit score, it can take far less time to undo all your hard work.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Aim for 30% Credit Utilization or Less
If you can't always do that, then a good rule of thumb is to keep your total outstanding balance at 30% or less of your total credit limit. From there, you can work on whittling that down to 10% or less, which is considered ideal for raising your credit score.
Pay your credit card balances in full every month – lenders can see that you're able to pay your bills without accruing substantial debt. If you can't pay the balance of your cards, pay more than the minimum each month – try to keep your cards below 30 percent of their credit limit.
Regularly pay off debt
This means meeting at least the minimum repayments due on any personal loans or credit cards by the due date each month. While you may only have to make the minimum payment, paying off as much as you can reasonably afford every month may reduce interest charges and can improve your credit score.
Simply using your card for purchases won't help build or rebuild your credit. Instead, building and rebuilding is about using your card responsibly over time to help improve your credit score. And a better credit score could help with things like qualifying for a mortgage and even getting a job.
If your goal is to get or maintain a good credit score, two to three credit card accounts, in addition to other types of credit, are generally recommended. This combination may help you improve your credit mix. Lenders and creditors like to see a wide variety of credit types on your credit report.
The credit-building journey is different for each person, but prudent money management can get you from a 500 credit score to 700 within 6-18 months. It can take multiple years to go from a 500 credit score to an excellent score, but most loans become available before you reach a 700 credit score.
Although adding extra credit cards to your profile won't directly help your score, it could provide an indirect lift by reducing your credit utilization ratio. Utilization is simply the amount you owe on your cards divided by your available credit.
If your credit report shows scores out of 1,000, above 690 is excellent and above 540 is good.
While the exact range for a bad credit score in Australia can depend on the credit scoring model, usually a score between the range of 300-550 is considered a bad credit score.