Your First Credit Card in Australia: How to Build Credit from Scratch

The Rejection Nobody Warns You About

You've done everything right. Finished uni, landed a decent job, saved some money. Now you want a credit card — maybe to book flights, maybe for emergencies, maybe just because every adult you know seems to have one. You fill out the application. And you get knocked back.

Not because you've done anything wrong. Not because you owe anyone money. But because you've never had credit before, and in the eyes of the system, that makes you invisible.

It's one of the great catch-22s of Australian finance. You can't get credit without a credit history. And you can't build a credit history without credit.

How Credit Files Work in Australia

Every Australian who has ever applied for credit has a file held by three credit bureaus: Equifax, Experian and Illion. These bureaus collect information from banks, lenders, phone companies and utility providers.

Since 2018, Australia has operated under a comprehensive credit reporting system established by Part IIIA of the Privacy Act 1988. That means your credit file doesn't just record the bad stuff — it also records the good. Every on-time repayment gets noted. Every month you pay your credit card bill by the due date, that positive mark appears on your file.

This is actually great news if you're starting from zero. It means you can actively build a positive history, not just avoid a negative one.

Why It Matters More Than You Think

You might think a credit score only matters when you want a home loan. That was true ten years ago. Today, your credit file touches nearly everything.

Landlords check it before approving a rental application. Some employers look at it during background checks. Phone companies check it before giving you a plan. Car dealers check it. Even some insurance providers factor it in.

Starting early gives you a runway. By the time you actually need serious credit — a home loan, a car, a business investment — you'll have years of positive history behind you instead of a blank page.

Common Myths About Building Credit

Myth 1: You need to carry a balance to build credit

This is one of the most damaging myths out there. You do not need to carry a balance or pay interest to build credit. Paying your full balance every month builds exactly the same positive repayment history as making minimum payments — without the interest charges.

Myth 2: A debit card builds credit

Debit cards don't touch your credit file. They draw from your own money, so there's nothing to report to the bureaus. Only credit products — credit cards, personal loans, car finance, phone plans on contract — generate repayment history.

Myth 3: Checking your own score damages it

Checking your own score is a soft enquiry. It does not appear on your credit file and has zero impact on your score. You should check regularly — at least every few months — to catch errors early.

Myth 4: Being added to someone else's card builds your score

In Australia, being an additional cardholder on someone else's credit card generally does not build your own credit history. The account is tied to the primary cardholder. You need credit in your own name.

How to Choose Your First Credit Card

Not all credit cards are created equal, and the flashiest card with the most rewards points is almost certainly the wrong choice for someone building credit from scratch. Here's what to look for:

Start with a low limit

A $1,000 to $2,000 limit is perfect. It's enough to be useful but not enough to get you into serious trouble. Many major banks offer low-limit cards specifically designed for people who are new to credit.

Choose a low or no annual fee

You're building credit, not collecting frequent flyer points. A no-fee card from CommBank, ANZ, Westpac or NAB will build your credit file just as effectively as a $400-a-year platinum card.

Avoid store cards

Retail store cards often come with higher interest rates and less flexible terms. They can also look less favourable on your credit file compared to a standard bank-issued Visa or Mastercard.

Skip "pre-approved" offers in your letterbox

Those "you're pre-approved!" letters don't mean you actually are. Applying and getting rejected still creates a hard enquiry on your file. Research properly before you apply.

What to Do Once You Have the Card

Getting approved is only the first step. How you use the card in the first 12 months sets the foundation for your entire credit history.

Use it for small, regular purchases

Put your weekly groceries or petrol on it. Something you'd buy anyway. This creates consistent activity that the credit bureaus can report on.

Pay the full balance every month

Set up a direct debit to pay the full balance on the due date. This way you never pay interest and you never miss a payment. Under comprehensive credit reporting, every on-time payment is recorded as positive history.

Never use more than 30% of your limit

If your limit is $2,000, try to keep your balance below $600 at any point. High utilisation — even if you pay it off — can signal risk to some credit scoring models.

Don't apply for more credit too soon

Every credit application creates a hard enquiry. Under the Privacy Act 1988, enquiries stay on your file for five years. Space out your applications — give it at least six months before applying for anything else.

A Real Scenario: How Sarah Built Her Credit from Nothing

Sarah graduated from uni at 22 with a teaching degree and her first full-time job. She'd never had a credit card, never taken a loan, never even had a phone plan in her own name — her parents had always handled that.

When she tried to get a credit card to book overseas flights, she was declined. No credit history. She felt embarrassed and confused. She'd never missed a bill in her life.

She applied for a low-limit $1,000 card with her bank — the same bank where she'd had her savings account since she was 15. This time, approved. She put her weekly groceries on it, set up autopay for the full balance, and didn't touch the card otherwise.

Twelve months later, her Equifax score had gone from non-existent to 650. Eighteen months in, she was approved for a car loan at a competitive rate. The credit card she barely thought about had quietly built the financial profile she needed.

What If You've Been Knocked Back?

If you've already been declined for a credit card, don't panic — and don't keep applying. Each rejection creates another hard enquiry, making the next application even harder.

First, get a copy of your credit file. You can access it for free from Equifax, Experian and Illion. Look for anything unexpected — errors happen more often than you'd think. A wrong address, a mistaken identity, or even a phone bill you forgot about years ago could be sitting on your file.

If you find errors or unexpected listings, they may be removable. Under the Privacy Act 1988, credit information must be accurate, complete and up to date. If it's not, you have the right to dispute it.

Beyond Credit Cards: Other Ways to Build Credit

A credit card isn't the only path. Here are alternatives that also build repayment history:

• Phone plan on a contract — a 12 or 24-month mobile plan in your name generates monthly repayment data
• Small personal loan — even a $2,000 personal loan paid over 12 months creates positive history
• Car insurance paid monthly — some insurers report to credit bureaus when you pay by instalments
• Afterpay and BNPL — be careful here. These services now report to credit bureaus, and missed payments create negative marks

What to Do Next

If you're starting from zero, the single best thing you can do today is check your credit file. Know your starting point. Then choose one credit product — ideally a low-limit credit card — and commit to using it responsibly for at least 12 months.

If you've already been knocked back, or if you've found something unexpected on your credit file, request a free credit assessment. Our team at Australian Credit Solutions can review your file, identify any issues, and help you understand the fastest path forward.

Elisa Rothschild

(BA/LLB)

Principal Solicitor & Director

With over 12 years of experience in credit law, Elisa has helped thousands of Australians remove unfair credit listings and rebuild their financial futures. She leads Australian Credit Solutions' legal team with a focus on consumer advocacy and regulatory compliance.

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