Are credit checks mandatory?
In Australia it is impossible to get a credit card without the provider performing a credit check first. This is for your benefit, as it helps to prevent you from falling into avoidable debt.
For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.
Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.
Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.
Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.
There are two reasons you should check your credit rating: so you have a better understanding of your financial position, and so you can take action (if necessary) to improve your credit rating.
Lenders often use credit ratings or credit scores to assess loan applications. The higher your score, the more likely you are to get approved – and the more likely you are to be charged lower interest rates and lower fees. Conversely, the lower your credit score, the less likely you are to get approved – and the more likely you are to be charged higher interest rates and higher fees.
If you discover you have a substandard credit rating, there are nine steps you can take to improve it. Those steps include consolidating multiple debts, fixing errors on your credit file, making repayments on time, paying off loans and closing extra credit cards.
Credit cards are a personal responsibility, so the reasons behind getting a credit card should also be personal.
You should always consider all the pros and cons of taking out a credit card before you sign on the dotted line.
For example, pros include the fact that credit cards can be a good way of paying for purchases, earning rewards points and building a credit history.
But there are also cons – credit cards can be expensive and put a lot of financial pressure on you.
You need to consider your personal finances and your lifestyle choices. Do you need a credit card? What options are out there for me? Can I handle the repayments? Why am I getting a credit card in the first place?
Pensioners can get credit cards with certain banks – if they can convince the bank they’re credit-worthy. Here are some points to consider if you are a pensioner looking for a credit card:
Annual income: Look for a credit card for which you easily fall within the minimum annual income requirements. This can be from the pension, superannuation or any other sources.
Annual fees: If high fees are a concern for you, opt for a card with a low or $0 annual fee. You want to make it as easy as possible to fit a credit card into your current lifestyle and spending habits.
Interest rate: Make sure you won’t have any nasty surprises on your credit card bill. Choose a card with a low interest rate to minimise risk (to both yourself and the bank – and this will help your application).
What happens if I have a bad credit score?
If you have a bad credit score, you might encounter two main problems. First, the lower your credit score, the more likely you are to be rejected when you apply for a loan or any other credit product. Second, if your application is accepted, the less likely you are to qualify for the lowest interest rates.