How to improve your credit score with a credit card

Yes, a credit card can help improve your credit score. Every time you apply for a credit card, there's potential that your credit score may take a hit. But you can use your credit card to your advantage through making repayments on time, paying more than the minimum payment, managing your credit limit, plus loads more.

How do credit cards affect your credit history?

Your credit report includes details of a wide range of financial products you apply for or use over the course of your life. This includes credit cards, loans, mortgages and utility accounts such as phone plans and gas or electricity accounts. If you have a credit card, the following details will be included in your credit report:

• The type of account. Credit cards and loans are generally considered the most “valuable” types of accounts to have listed on your credit history because they give lenders an indication of your ability to manage and repay a line of credit.
• Loan inquiries. Applications for credit cards and loans are considered “new loan inquiries”, which are also listed on your credit report. Several applications for credit in a short time period can hurt your credit score and be a red flag to lenders reviewing your history. However, credit enquiries spread out over time can demonstrate your ability to successfully apply for and manage credit products.
• Credit limit. When you get a credit card, your credit limit is also listed on your credit report. These details help lenders see how much access you have to credit when considering applications for loans and other products.
• Monthly repayment history. Your credit history lists if you pay your credit card on time and whether you pay the minimum or full amount each month. This information also gives lenders an idea of your ability to make timely repayments.

Keep in mind that these are just some of the details listed on your credit history. You can learn more about what else is included with our guide to understanding your credit report.

How can I use a credit card to improve my credit history?

Every time you apply for a credit card or use your card, there’s the potential that it will impact your credit history. You can use this to your advantage and build good credit in the following ways:

• Only apply for one card at a time. Having too many credit card applications can hurt your credit score, so make sure you compare credit cards and then apply for the one that best suits your needs at the time. If your application is accepted, don't apply for another card straight away. Instead, take some time to improve your credit history by demonstrating positive payment behaviours with other accounts.
• Make repayments on time. Paying off your credit card balance on or before the due date shows lenders you are responsible with your accounts. Depending on the credit card you choose, you could set up automatic payments from a nominated bank account.
• Pay more than the minimum. You're only required to pay the minimum payment on your credit card each month. This is usually only 2% or 3% of the amount owing, which leaves the rest to attract interest. If this grows into unmanageable debt, this could hurt your credit score. Instead, paying your account in full (or paying as much as you can) will reduce your interest costs and help keep your account in good standing. It also demonstrates positive credit habits on your report.
• Consolidate debts. If you already have one or multiple credit cards, you can transfer them to a balance transfer credit card that charges no interest for up to 26 months. Not only will you save without paying any interest, you can also potentially pay off your debts faster and potentially lower your combined credit limits.
• Manage your credit limit. If you're planning to apply for another credit card and already have a card with a high credit limit, you may want to consider lowering it. Multiple unsecured debts and high credit limits can hurt your credit score. You can see our guide to how credit limits affect credit scores for more information.

What type of credit card will help my credit history?

If you're trying to build your credit history, there are a few different credit cards that may help you:

• Low interest rates. You should always aim to pay your balance in full to avoid paying interest. If you think there may be instances when you can't clear the balance, consider a card that charges a low interest rate. Compared to other cards, interest rates between 8.99% p.a. and 14.99% p.a. are considered low.
• Student or first credit cards. There are some products designed to suit people with limited credit card experience. For example, the ANZ First is a no frills card that is suited for first-time credit card applicants or people who want a basic credit card.
• Low credit limit. A credit card with a low maximum credit limit can help keep your spending in check.

Most Australian credit card issuers won't approve applicants who have a bad credit history. This is why it's important to order a copy of your credit report and score (which you can do for free through Finder) before you apply. If you have a low credit score, you should spend some time improving it before you apply. Check out our guide to improving your credit score for some tips.

Compare credit cards with low interest rates

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Name	Product	Purchase rate p.a.	Interest-free period	Balance transfer rate p.a.	Annual fee
Bendigo Bank Low Rate Credit Card		0% for 20 months, reverts to 11.99%	Up to 55 days on purchases	0% for 20 months with 2% balance transfer fee	$45	Save money on interest for up to 20 months with 0% p.a. on purchases and balance transfers (11.99% p.a. after). Plus, a $45 annual fee.	Go to site More Info	Compare	loading Fetching your data...
Virgin Money No Annual Fee Credit Card		0% for 12 months, reverts to 18.99%	Up to 55 days on purchases	0% for 12 months	$0	Save with a $0 annual fee and 0% p.a. on balance transfers and purchases for 12 months.	Go to site More Info	Compare	loading Fetching your data...
St.George Vertigo Card		13.99%	Up to 55 days on purchases	0% for 32 months	$0 for the first year ($55 thereafter)	Get a 0% interest rate on balance transfers for 32 months (with no balance transfer fee) and a $0 annual fee for the first year.	Go to site More Info	Compare	loading Fetching your data...
Citi Rewards Card - Purchase and Balance Transfer Offer		0% for 14 months, reverts to 21.49%	Up to 55 days on purchases	0% for 14 months	$49 for the first year ($149 thereafter)	Save with 0% on purchases and balance transfers for 14 months with no balance transfer fee. Plus, $49 first-year annual fee.	Go to site More Info	Compare	loading Fetching your data...
Coles Low Rate Mastercard		12.99%	Up to 55 days on purchases	0% for 36 months	$58	Enjoy 0% p.a. on balance transfers for the first 36 months (with no balance transfer fee).	Go to site More Info	Compare	loading Fetching your data...
ANZ Low Rate		12.49%	Up to 55 days on purchases	0% for 30 months	$0 for the first year ($58 thereafter)	Now eligible for Cashrewards Max. Save with 0% p.a. on balance transfers for 30 months (with no BT fee) and $0 first-year annual fee. Plus a 12.49% p.a. purchase interest rate.	Go to site More Info	Compare	loading Fetching your data...
Citi Clear Card - Balance Transfer Offer		14.99%	Up to 55 days on purchases	0% for 36 months	$99	Offers 0% p.a. on balance transfers for 36 months with no balance transfer fee. Plus, complimentary insurance covers.	Go to site More Info	Compare	loading Fetching your data...
Westpac Low Rate Card - Cashback Offer		13.74%	Up to 55 days on purchases	6.99% for 12 months	$59	A no-frills card offering up to $400 cashback: $100 each month you make at least $1,000 of eligible purchases for the first 4 months.	Go to site More Info	Compare	loading Fetching your data...
BankSA Vertigo		13.99%	Up to 55 days on purchases	0% for 32 months	$0 for the first year ($55 thereafter)	Offers 0% p.a. for 32 months on balance transfers (with no balance transfer fee). Plus, a $0 first-year annual fee.	Go to site More Info	Compare	loading Fetching your data...
Bank of Melbourne Vertigo Card		13.99%	Up to 55 days on purchases	0% for 32 months	$0 for the first year ($55 thereafter)	Save with a 0% interest rate on balance transfers for 32 months (with no balance transfer fee) and a $0 annual fee for the first year.	Go to site More Info	Compare	loading Fetching your data...
American Express Business Explorer Credit Card		3.99% for 6 months, reverts to 19.99%	Up to 55 days on purchases		$0 for the first year ($149 thereafter)	ABN holders w/ $75,000 revenue. Get 120,000 bonus points when you spend $3,000 in the first 3 months. Plus, $0 first-year annual fee.	Go to site More Info	Compare	loading Fetching your data...
American Express Essential Credit Card		14.99%	Up to 55 days on purchases		$0	Get a $200 credit when you spend $1,500 on eligible purchases in the first 3 months. Plus, a $0 annual fee for life.	Go to site More Info	Compare	loading Fetching your data...
American Express Low Rate Credit Card Finder Award		8.99%	Up to 55 days on purchases		$0	Offers a low ongoing interest rate of 8.99% p.a., up to 55 days interest-free on purchases and global card support. Ongoing $0 annual fee.	Go to site More Info	Compare	loading Fetching your data...
St.George No Annual Fee		0% for 12 months, reverts to 20.74%	Up to 55 days on purchases		$0	Save with a 0% p.a. interest rate offer and a $0 annual fee. Plus, a minimum credit limit of $500.	Go to site More Info	Compare	loading Fetching your data...
ANZ Platinum Credit Card		0% for 25 months, reverts to 20.24%	Up to 55 days on purchases	21.24%	$0 for the first year ($87 thereafter)	Now offering Cashrewards Max. Receive a 0% purchase rate offer for 25 months and a $0 first-year annual fee. Plus, complimentary overseas travel and medical insurance.	Go to site More Info	Compare	loading Fetching your data...
Citi Premier Qantas Card		0% for 6 months, reverts to 21.49%	Up to 55 days on purchases	0% for 6 months	$175 for the first year ($350 thereafter)	Get 80,000 bonus Qantas Points when you spend $4,000 in the first 90 days and a 0% purchase rate offer. Plus, a first-year annual fee discount.	Go to site More Info	Compare	loading Fetching your data...

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What is a good or bad credit score?

If you're wondering where your credit score sits on the scale and want a goal to work towards, you can look at the credit score bands issued by credit reporting agencies Experian and Equifax below.

If used responsibly, credit cards can be a useful tool to manage your finances and build a healthy credit history. It's important to spend properly, make timely repayments and pay off as much as your balance as possible each month. If you have a low credit score with negative listings on your report, spend some time improving your score before you apply for a credit card.

Picture: Getty