It’s not uncommon for young Australians to have no credit history. After all, you’ve not had the time or life experience to build up your credit file. Unfortunately, it is not possible to get a credit card without having a credit history and credit score. 

Your credit score is a number that indicates your creditworthiness as a borrower. Banks and other credit providers consider your credit scores when deciding whether or not to lend you money or approve your credit card application, as it is based on your past payment behaviour.

In the absence of credit history, it can be challenging for a credit provider to assess how reliable you are as a borrower, leading them to reject your credit card application. But this is different from having bad credit on your file, which is another common reason for credit card applications to get declined. 

Let’s explore the reasons why you will struggle to get a credit product with no credit history, and how to build your credit file.

Why don't I have a credit history?

There are several reasons why you may have no credit history, or a very short history.

• You are a young Australian likely still living at home, and you have simply not yet built up a credit file by holding a utility account (like gas, electricity, phone and internet) in your name.
• You use a prepaid mobile account. Of course, there's nothing wrong with using a prepaid mobile account, but it won't help you build your credit history.
• You don't use a credit card, and you never applied for a loan. This could be the case when you are young and haven't had enough time to build your credit, or you prefer to pay for things with cash rather than using credit to save interest.

Keep in mind that having no credit history is a better position to be in than having a bad credit history.

Getting a credit card with no credit history

When you apply for any credit product, whether it be a credit card or a car loan, the provider will need some assurance that you are responsible with money and regularly meet your repayments on time. This is where a credit history comes in, and why it is a vital step in the application process for a credit card. 

A lender will perform a hard credit check on you when you apply for a credit card to ensure you are likely to pay your bills. If you do not have a credit history, you will not have a credit score, and this will generally result in a rejected credit card application. 

An alternative option to consider is applying for a joint credit card with someone who has a good credit history. Applying for a credit card with someone, say your parents or spouse with a good credit score, may increase your chances of getting approved, as the issuer will use both of your credit histories and incomes to test your eligibility.

Joint credit cards managed responsibly may help build your credit history, but keep in mind that any missed payments will affect both account holders' credit scores, and may lead to resentment in the relationship over time, so be careful.

How to build a credit score

Applying with a partner is also no guarantee that your credit card application will get approved. Even though you stand a better chance of getting approved with a partner who has a good credit history rather than applying on your own with no credit, a bank may still decline your application based on other factors, like the total income and liabilities of both account holders.

This means it may be worthwhile to simply work on growing your credit history over time before you apply for a credit card. 

Not having a credit history is somewhat like a Catch-22 situation. If you don't have any credit history, it's unlikely that you'll get approved for a credit card or loan. But how do you build your credit from scratch without opening a credit account? Luckily, there are some steps you can take today: 

1. Start your own phone plan

To begin with, it may help to take out a phone plan in your name, as this is one of the easier forms of credit to manage.  

A postpaid mobile account is considered a credit account, and it is reported on your credit file. If you are currently on your parent’s phone plan, are above the age of 18, and earning a regular income, it may be worth applying for your own phone plan. Getting a postpaid connection should help you build a credit history, and paying your bills on time will boost your credit score.

2. Put your name on a family utility bill

You could also put any utility account in your name to start building your credit. If you still live at home it could be as simple as your family adding your name to the account. This includes:

• Electricity bills
• Gas bills
• Water bills
• Internet bills

3. Pay your bills on time

Speaking of missing repayments, avoiding late payments is one of the easiest ways to ensure your credit score stays high. To help with this, you could set up an auto-debit facility or put bill payment reminders on your phone. Thanks to comprehensive credit reporting, many providers are recording positive credit information, such as making your repayments on time, with the credit reporting bureaus. This small action may work in your favour. 

Once you have built a decent credit score, you can apply for a credit card with a low credit limit to improve your chances of approval.  

No credit vs. bad credit: What's the difference?

If you have no credit history, it means a credit provider doesn't have much information to predict how reliable you are as a borrower because you don't have a track record. It is not the same as having bad credit, which indicates you have a credit history, but it isn't exactly spotless.

Bad credit is when you have a lower than average credit score, which could result from bankruptcy or defaulting on your credit agreements. Bad credit can make it challenging to get approved for new credit. 

You can request a copy of your credit scores for free at RateCity’s Credit Score hub right now. This report takes minutes, and you’ll be able to discover if you have an existing credit score and credit history, and if you need to boost your credit score.  

You can also check your credit report with each of the major credit bureaus for free once every three months, at no cost to yourself. If you find your credit report to be empty or relatively thin, you may want to start building your credit using the above steps. 

Reviewing your credit file periodically also helps you stay on top of your credit health. Errors regarding your payment information can sometimes creep into your credit report and pull your score down. If you find any information that you think might be incorrect, you can ask the credit provider or the credit reporting body to investigate the error and remove it.

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