Is Getting a Credit Card Really THAT Bad for Your Credit Rating?

Blue Cat on 28/04/2021 - 18:54

So long story short, I got an offer from ING to get a credit card with them (Orange One), make 5 purchases and I will get a $100 bonus, which sounds incredibly good to me. They also have no annual fees so I am planning to keep it as a last resort backup in a nightmare scenario where I have zero cash at all.

I have never got a credit card before and I have never had any debt, and I bet that my credit score is as clean as possible, however, will getting a credit card (and keeping it without using it) affect my credit score? I heard some guys saying that having a credit card and never being late with payments actually increases your score… anecdotal evidence of course. Or am I better off getting the card, getting the reward and closing the account ASAP?

Just scared in the future that I will be refused a home loan or something else serious because I decided to get $100 from a promo in a hurry.

Poll Options

  • 53
    Get the credit card, get the reward and keep the card for a really rainy day.
  • 5
    Get the credit card, get the reward and close the account ASAP.
  • 5
    Do not get the credit card - your credit rating is more important than $100!
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Comments

  • hashtagbargain on 28/04/2021 - 19:06
    +3

    Getting a credit card and paying off in time increases your credit score. Shows that you’re a grown up.

    • watwatwat on 28/04/2021 - 19:34

      paying off in time increases your credit score.

      Seems wrong but feel free to provide a citation.

      • burningrage on 28/04/2021 - 20:37

        I am sorry this is false.

        Since the start of the CCR, my score has NEVER gone up because of repayments which I never missed, but instead, because of the passing of times between the last time I applied for a Card and now. That is, didn't do anything for years and even that, it has stopped at 800+ (never went to 900 let alone 1000).

        Never missed payment on anything, didn't apply for anything (got existing cards), but got 2 declines since CCR started.

        • watwatwat on 28/04/2021 - 20:50

          What?

        • mskeggs on 28/04/2021 - 21:19
          +8

          How did you get declines without applying for anything?

  • star-ggg on 28/04/2021 - 19:07
    +5

    Unless you're delinquent with your payments, home loans only care about the amount of limits you have. The limit is counted as debt you already have even if the credit isn't being used. This is easily fixed by cancelling the credit card before applying for a loan.

  • TEER3X on 28/04/2021 - 19:09

    If it's anything like in the US, the more the better, but it's not that simple. Credit utilisation (eg using 10% of your credit limit) and age of accounts is important, as is never having a late payment, or much worse a default.

    • El-Rhi on 28/04/2021 - 20:06
      +6

      In Australia credit utilisation has zero impact on credit score because it’s not reported, only the limit is

      • burningrage on 28/04/2021 - 20:39

        And that is why I despise CCR. It uses the limit even though they are not used and they are treated as debt.

        So you got penalized over something that you didn't do which is not a reflection of who you really are as responsible credit card user.

      • TEER3X on 30/04/2021 - 20:18

        I wonder if that will change at some point, since we didn't even always have credit scores afaik

  • Settero on 28/04/2021 - 19:13
    +1

    dont get that card ! get a better offer , one application is fine , multiple applications over a short period looks bad at first glance.

  • Tripnfelt on 28/04/2021 - 19:14

    Just having an unused credit card should not effect your credit score, unless you've had a lot of recent applications for credit, phone plans etc and those lenders ran credit checks that show on your file. This could be the one that makes it drop.

    Lenders may look at available credit as debt in their calculations even if your balance is $0 - so not great to have sitting around unused if your applying for home loans etc soon.

    Take your personal circumstances into consideration. My only financial advice is don't get into that nightmare scenario where you have zero cash.

  • spiff on 28/04/2021 - 19:20
    +10
    • Having a good credit history is better than having no credit history
    • Having a good credit history wont affect your credit score
    • Multiple enquiries (applying for loans, credit cards, Zip accounts) may affect your credit score in the short term but it should go back within 12 months if your repayments are on time
    • I apply for 3-6 credit cards a year and have no issues refinancing or getting a loan
    • With regards to home loan assessment, the bank will take your living expenses (say $2.5k per month for a couple), take roughly 35% of your total credit limit (35% of a $6000 credit card limit is $2100 per year, divide by 12 to get $175 per month), and add them together to see whether you can service the loan. It doesn't matter how much you have spent, or not spent on your card. You might not have used it for the last 6 months before you apply for a home loan but they will still assess based on total credit card limit.
    • The deal you outlined is not great and I personally wouldn't waste my time or a credit enquiry just for this particular joining offer. I wouldn't keep it for emergencies either because it doesn't collect points. But it sounds like you have never had a credit card before so this might be a good one to dip your toes into and start developing a credit history. But look into the current ANZ Reward card offers for examples of good sign up bonuses.
    • Blue Cat on 28/04/2021 - 20:22

      I apply for 3-6 credit cards a year and have no issues refinancing or getting a loan

      Do you close those cards once you get the deal or do you keep them?

      • spiff on 28/04/2021 - 20:30

        I keep 3 credit cards, all with zero annual fee. 2 of them collect points and 2 of them have price protect insurance (not offered anymore). Then I rotate in and out of other depending on bonus offer/annual fee.

        • Blue Cat on 28/04/2021 - 20:33

          Do you only get "new customer" bonuses or some cards reward you for loyalty?

          • spiff on 28/04/2021 - 21:22

            @Blue Cat: Credit card bonus offers usually have a condition where you can't have held the card (or a card in that "family" of cards) for the prior 12 months, or 18 months for Amex. So that's why you should cancel as soon as you receive the bonus offer, be it points or vouchers or whatever, to reset that exclusion period asap.

  • pantsparty on 28/04/2021 - 19:26
    +4

    $100 is an extremely low sign up bonus. Really not worth the effort.

    Lots of credit cards currently on the market offer 100k or more bonus Qantas points. Worst case redeem them for a $500 supermarket gift card through Qantas. Best case redeem them for a $2,000 or more business class flight once COVID is over.

    I apply for multiple cards a year and my credit rating is fine.

    • Blue Cat on 28/04/2021 - 20:21

      It is a "great" reward as I have never had any credit cards before - triple digit dollar sum looked good for me! Also easy to do, I will just need to shop at Woolies 5 times - it is basically free $100!

      redeem them for a $2,000 or more business class flight once COVID is over.

      Why would the government want to loosen it's grip on complete control of the population? I don't think it is happening soon, so I don't plan to count on it. If I can't redeem it for supermarket vouchers or cash then I am not sure I can really benefit.

      Thanks for the info!

      • Neoika on 28/04/2021 - 20:25
        +2

        Since you never have a credit card, it is better to start with a bank that has already all your info and history. I think it is the right move.

        • Blue Cat on 28/04/2021 - 20:32

          Is it easier to get approved for other credit cards if they see that I already have one? Hence, another benefit of this ING credit card?

          • Neoika on 28/04/2021 - 20:36
            +1

            @Blue Cat: No guarantee, standard criteria apply.

            You think too much. I got Woolies credit card approved two years ago without any physical evidence, only by submitting the application form and ID check. No wonder it paused new application since covid started. Just to say sometimes it is so easy and quick.

      • spiff on 28/04/2021 - 20:31
        +1

        All points systems affiliated with credit cards can be redeemed for supermarket vouchers.

  • clearance on 28/04/2021 - 20:55

    Get a credit card primarily to build your credit history with the bank that you might consider for future transactions, like a home loan. While they can ask you for your credit card statements from another bank, it is easier if the loan and credit card is from the same bank. Choose the benefits they offer together with the rest of the services the bank offers. Minimize or eliminate your fees, and make sure to pay in full and on time. We have a home loan and it wasn't taken against us that we had a credit card. Like others said, they'll ask you to reduce your credit limit if they think it is too high together with a home loan. We even got a new credit card from the same bank that approved our home loan.

  • Godric on 28/04/2021 - 21:25

    Never paid a cent in interest for all the assortment of Credit Cards I've held over the many years.

    Just keep to a good habit of paying it off at the end of every month, and don't spend what you can't afford out of your own pocket.

  • AirbusA389 on 28/04/2021 - 23:21

    does anyone has issues with Lenders Mortgage Insurance after churning through credit cards?

    i have a friend who is a credit card churner for the qantas points, broke up with his partner, and currently stuck trying to takeover + refinance the house on his own. bank approved his mortgage insurance but Genworth declined him outright.

    • spiff on 29/04/2021 - 11:35

      I would probably think that getting declined for insurance has nothing to do with credit card churn alone and more to do with defaulting on payments on those credit cards.

      • AirbusA389 on 29/04/2021 - 16:49

        he forwarded his cc bills to me out of frustration. All paid before the due date. No rollovers, no outstanding debt. All mortgage paid on time. i believe he has a year's worth of mortgage payments sitting in his offset. it's a very very odd case

        • spiff on 29/04/2021 - 18:46

          Oh wow very interesting! Doubt Genworth would provide any clarity. Wonder if the bank might, being an unusual case.

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