Aug 19, 2025
What is a credit profile and why does it matter?
Your credit profile is essentially your financial reputation – a detailed record of how you have managed credit and financial commitments over time. It covers everything from credit cards, personal loans, and home loans to utilities, phone bills, and even buy-now-pay-later services that are in your name. This information is collected and maintained by Australia’s major credit reporting agencies such as Equifax, illion, and Experian.
Your profile typically includes:
Your credit score – a number that summarises your overall creditworthiness.
Repayment history – whether you’ve paid bills and loan instalments on time.
Current credit accounts – including the type and limit of credit facilities you hold.
Defaults, late payments, or serious infringements – which can stay on your record for years and affect future applications.
⚡ Why does this matter? When you apply for a home loan, lenders use your credit profile to assess risk – essentially, how likely you are to repay the loan on time. A strong credit profile can open the door to more lenders, better approval chances, and access to more competitive interest rates. On the other hand, a weak profile with missed payments or defaults may limit your options or mean you’ll face higher costs when borrowing.
🔔 Does having a credit card help build credit?
Yes – when managed responsibly, a credit card can be one of the most effective tools for building a strong credit history in Australia. Every time you make purchases on your credit card and then pay your bill on time, you’re creating a track record that shows lenders you can handle borrowed money wisely. Another important factor is credit utilisation – the amount of credit you use compared to your overall limit. Keeping this low (for example, using less than 30% of your limit) signals to lenders that you don’t rely too heavily on credit and can manage your finances with discipline.
Over time, this responsible behaviour helps strengthen your credit profile and improve your credit score. A healthier score can make a real difference when applying for finance, as it may lead to:
Better home loan approval chances – more lenders may be willing to say “yes” to your application.
More competitive interest rates – lenders often reward lower-risk borrowers with lower rates, which could save you thousands over the life of a loan.
Higher borrowing capacity – a strong credit profile can give lenders the confidence to approve you for a larger loan amount.
💡 Example: Imagine Sarah, a young professional who just received her first credit card with a $2,000 limit. Instead of maxing it out, she uses it for small, regular purchases like groceries and petrol, then pays the balance in full every month. She also keeps her spending well below her limit. After two years of consistent, on-time payments, her credit score improves significantly. When Sarah applies for her first home loan, the bank sees her strong credit profile and offers her a lower interest rate – saving her thousands of dollars over the life of her mortgage.
⚠️ On the flip side, missing payments or regularly maxing out your card can harm your credit history, making it harder and more expensive to borrow in the future.
🚫 is a credit card required for a home loan?
Not at all. You can apply for a home loan in Australia without ever owning a credit card. However, in the absence of any credit history, lenders may find it difficult to assess how you manage repayments. That is why many brokers and lenders recommend having at least one well-managed credit facility on your record.
👀 Other ways to build your credit profile
If you are not comfortable with using a credit card, here are other ways to demonstrate good financial behaviour:
1. Utility and Phone Bills: Putting your electricity, gas, or mobile plan under your name and paying them on time can contribute to your credit profile.
2. Buy Now Pay Later Services (BNPL): Services like afterpay or Zip report to credit bureaus. Use them responsibly and pay on time.
3. Personal or Car Loans: If you take out a small personal loan and repay it consistently, it helps build your profile.
4. Rental Payments: Platforms like Rental Exchange can report your on-time rent payments to credit bureaus.
✅ What to keep in mind with credit cards
A credit card can be a powerful tool for building your credit profile – but only if it’s managed wisely. Poor usage can just as easily damage your score and make future borrowing more difficult. If you decide to get a credit card, here are some important things to remember:
Start with a low limit ($1,000–$2,000): Especially if it’s your first card, keep the limit small. This helps you learn to manage credit without the risk of overspending.
Always pay the full balance by the due date: Paying only the minimum amount keeps you in debt longer and adds interest costs. Paying in full every month shows lenders you can manage your money responsibly.
Avoid using more than 30% of your credit limit: For example, if your limit is $2,000, try to keep your balance under $600. This is known as your credit utilisation ratio – a key factor in your credit score.
Never miss a payment: Even one late payment can stay on your credit file for years and affect your borrowing capacity. Setting up automatic payments or reminders can help you stay on track.
⚠️ Why this matters: Misusing a credit card – such as carrying high balances, missing payments, or maxing out your limit – can hurt your credit score and reduce your chances of qualifying for a home loan. Lenders see these behaviours as warning signs that you may struggle to repay larger debts like a mortgage.
💡 Example: Tom had a $3,000 credit card but often kept it close to the limit and missed payments a few times. When he applied for a home loan, his lender noticed his poor repayment history and either declined his application or offered a loan at a much higher interest rate. If Tom had kept his balance lower and paid on time, he would have had access to better loan options.
💡 What’s best for you?
A credit card is not a requirement, but it is a useful tool to build a credit history especially for new migrants, international students and young professionals planning to buy a home in the near future.
At Select Loan and Mortgage, we help clients at every stage of their journey whether you are just starting to build your credit profile or getting ready to apply for your first home loan.
🔔 Need help planning your path to home ownership?
Contact one of our mortgage specialists today for free advice and personalised solutions.
