How credit cards are helping first-home buyers get into the property market

Kelly Emmerton

Wednesday 31 October 2018

Credit cards might be key to Aussie first home buyers getting a foot on the property ladder - but we aren’t talking about buying a home on your plastic.

How credit cards are helping first-home buyers get into the property market

According to an analysis of 9.2 million credit card holders and 14 million open credit card accounts by Experian, younger Aussies are seeing their scores improve by an average of 4% with the introduction of comprehensive credit reporting.

Credit card holders aged 18 to 25 are set to see the biggest increase in credit scores at 17%, followed by 25-35 year olds with a 5% increase.

RELATED: Only 1 in 5 millennials know what a credit score is, says CreditSmart

This is good news for Aussie first home buyers, as the new positive credit data could help borrowers with a short credit history build one up more easily and quickly, putting them in a better position when it comes time to apply for a home loan.

“Lenders are now able to see the number and type of credit accounts people have and whether they have been paying loans back on time, which helps them better evaluate who to provide credit to and lend more responsibly,” Poli Konstantinidis, Executive General Manager, Credit Services and Decision Analytics at Experian said.

Mozo Data Manager, Peter Marshall said that starting off with the right credit card and managing your spending and repayments responsibly can be a great first step towards becoming a creditworthy borrower.

“Using a credit card is often the first step for young people to start building up that credit history, and CCR means that even a relatively short history of faithfully paying off your balance will reflect well on you,” he said.

RELATED: Credit card buyers guide: fees, features and how to choose the right card for you

Despite the fact that younger credit card holders were seeing the biggest improvements in their credit score thanks to positive credit reporting, Experian’s research also showed that they’re often the group with the worst track record for paying off their credit cards on time.

The research showed that 5.8% of first home buyers and young Aussie families have missed a credit card repayment in the last 3 months. They’re twice as likely to miss a payment as the most affluent group of borrowers in the study, generally made up of 25-44 year olds, with an average weekly household income between $1,500 - $2,499.

RELATED: Aussies looking for a personal loan may not know how their credit score works, says Experian

And despite positive credit reporting now being used by the big four banks and other majors like Citi and HSBC, Experian found that 3 in 5 Aussies weren’t aware that their banks would be sharing more of their financial data.

With your financial history - and especially your management of credit sources like a credit card - becoming more important than ever, Konstantinidis suggested Aussie borrowers should check their credit score regularly, and be aware of what comprehensive credit reporting really means for their borrowing power.

“Potential home buyers need to be aware that their credit card usage, including the number of cards they own, can now have an impact on their future home loan applications,” he said.

Ready to start building up a healthy credit history? The first step is to find the right card. Check out some low interest rate credit card options to get started.

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