Not having a credit record can be almost as bad as having a poor credit record.
There are an increasing number of life events that rely on a good credit record. Credit records not only control access to credit, including mortgages and unsecured loans as well as credit cards, but they can also make the difference in other areas such as renting a house or shop space as well as receiving a job offer.
A good credit reference is seen by many people as a proxy for a number of other desirable traits, such as paying off bills on time and in full and not taking on more debt than can be sensibly handled. As credit scores are generally an accurate way of predicting whether or not a debt will be paid, they are relied on heavily as a quick way of assessing credit.
This can be a problem for a person without a credit record, or with a very sketchy credit record. There are a number of reasons a person may not have an extensive credit record. One of the most common reasons is that a person may have recently immigrated to Australia. Even for those with a good credit record in his or her native country, these aren’t imported from one country to another very easily. This situation may also apply to an Australian who has been travelling, particularly if this was done immediately after university.
Credit cards are actually a good way to build up a credit rating. Unlike mortgages, there are various types of credit cards available for people without an extensive credit history, although they tend to have higher interest rates and fees, and lower credit limits, than other credit cards. It is a good idea to borrow a small amount on such an introductory credit card and then pay the amount off in full. This will start to establish a good credit report, and if this pattern is repeated several times with the card over a year or longer, this will establish a good enough credit score for most lenders.
It is important to stress that if this strategy is followed to establish a credit history, then the borrowing done should be modest and special care should be taken to repay the balance in full every month, or over several months at most. Although having no credit can be difficult, a bad credit score is worse than no credit score.
