Ask Credit Card Finder: Afterpay vs. credit cards for building credit history
What details are added to your credit file when you use Afterpay or a credit card?
I recently got rejected from a contract phone plan because I don't have any credit history, so I want to build it up. I know you can use a credit card to add to your credit history, but what about Afterpay? Do they both work for this type of goal?
This is a great question to ask before you start adding to your credit history because it helps you take control over what's listed on your file and how it affects your credit score.
Unfortunately, using Afterpay for purchases doesn't add any details to your credit file when you pay off the account on time. If you make late payments, miss payments or have other issues in maintaining your account, Afterpay could report this information to the credit reporting bureaus, but that's not the type of credit history you want.
This is similar for other interest-free payment services, including Zip Money, Zip Pay, Openpay and Certegy Ezi-Pay, which may check your credit report but usually won't add to it unless you pay late or default on your repayments.
With credit cards, on the other hand, both your application and the account details are added to your credit file. This includes details about the provider, your credit limit and your repayment history, which means there's potential to use a credit card to build a good credit history.
One key detail to note here: Credit card providers will access your current credit report and use it to help determine whether you're eligible for a card – similar to what happened with the phone plan you wanted.
However, credit card providers also consider a range of other details, including your income and everyday expenses. So, if you have a stable income and meet the eligibility requirements for a credit card, your application will be considered.
If you're worried about approval (after what happened with the phone plan), you could start by looking at credit cards with low minimum income requirements. These cards tend to offer low credit limits, which could also help you keep your spending in check when you're using a card.
You could also contact your current bank and ask them about credit card options, as you already have a history and relationship with them.
Getting your first credit card can feel like a big financial step, so it's a good idea to think carefully about whether this option is right for you at the moment. As well as comparing credit cards, you may want to get a free copy of your credit report to see what's on there now – and keep track of your credit score as you build up more history.
Ask Credit Card Finder is a weekly column written by Finder's credit card expert Amy Bradney-George. All rates and fees are correct at time of publication and we only give general advice.
Do you have a question? Reach out in the comments or speak to someone from our 24/7 customer service team.
- New year, new business: Employee retention tips for January
- How your mortgage can get you big credit card savings
- January’s best balance transfer credit card offers: Start the new year with 0% p.a. for up to 30 months
- 5 key questions to ask when you’re selecting a card for business spending
- 6 things small businesses can do to set themselves up financially in 2021