Advice for which credit cards and impact on credit rating

[elemist]

Hi All,

Long time reader first time poster..

I've been reviewing my use of rewards cards over the last month or two and trying to work out what i should change too.

I'm reading more and more about the sign up bonus's with all the different credit cards. While it looks like a great idea, i'm concerned about the effect this would have on my credit rating. I've read a heap of info, though most of it seams to be US based so not sure how that compares to how it works in Australia.

Basically i currently have 3 credit cards, two i use regularly and one i keep in the top draw for emergencies. My daily cards are a Westpac Gold Altitude card, and for my business a Westpac Business QFF rewards card. The backup is a bankwest no annual fee card.

I recently converted my Altitude points to Velocity points taking the benefit of the 20% bonus offer and the more i read into the Velocity points the better the deal appears to be from a point earning perspective. Due to the conversion ration of Altitude points --> Velocity points i was thinking it would be worth cancelling the Altitude cards and moving to a direct earn card.

I received in the post an offer for a Amex Velocity card which offers 20k bonus points for sign up provided you spend a min $500 within 3 months, then an ongoing annual cost.

However as a lot of my suppliers don't take Amex cards i could really only use it for my daily personal card for shopping at Woolworths/Bunnings etc. It would still mean i would need a daily Visa/Mastercard for use where i can't use Amex.

I have also looked at the Virgin Money High Flyer card, and the Woolworths QFF card as well both offering bonus sign ups.

That said because of the annual cost of these cards, it's not effective to just keep them open for the sake of it as i would be spending more money on fees than i would if i were to go buy flights!

So a few things i'm struggling to work out..

Are the sign up bonus's worth the annual fee on the card? IE the QFF Woolies card has a 8k QFF bonus but an $89 annual cost?

I assume the answer would vary depending on whether i continue using the card or not, so assume i won't.

Would i get blacklisted and/or have trouble applying for cards in the future if i were to sign up get the bonus and cancel the card later?

I imagine it wouldn't look to favourable to basically take free stuff and run!

Does having multiple credit cards with nothing on them affect my credit rating if i was to look for home loans or general finance for anything?

I read on a US site that having multiple cards with nothing on them can actually improve your rating as when you work out a percentage of owing to available, the more you have available the lower your owing percentage is?

Would multiple applications for credit look bad on your credit file?

When you apply for credit cards they perform a check out your credit file, which creates an entry in your credit file. I have a copy of mine which lists most info, but doesn't always state how much or whether it was acted on. So for example last year i jumped on a HSBC offer with the no interest balance transfer for 6 months. According to my credit file it just shows as applied for credit account, unspecified account. After i paid out the balance transfer i waited a few months then cancelled the card.

Can a bank see how many cards you currently have and does this matter?

When you sign up for a new card, they always ask if you currently have other cards. I guess this is a first level check on your credit history.. But can they actually find out how many cards you have? I figure they can only go off your current accounts with them and whatever is on your credit file? That said the above HSBC card is still listed on my file yet i cancelled it last month? On the flip side my Bank West card isn't listed (had it for years!) yet its still current?

So if i was to apply for a card say direct with Amex of which i have no current accounts with them, only a 3rd party amex through westpac and neglect to mention any other cards can they find out? and would it be illegal to not tell them?

Applying for finance, say a mortgage, with mulitple cards.

Does a bank take the amount you have available in credit cards into account or just the amount of debt on them? I have a memory of a mortgage broker i spoke too telling me they take any available credit and count it as a debt regardless of if you have anything owing. So if you had 5-6 cards with a 5k limit on each they would count that as 25-30k in debt straight up?

Again would they have either anyway to find out if you neglected to mention any, or any recourse if they later found out you did?

I think thats enough for the time being.. have heaps more questions but will let you guys loose on this much as you will probably answer alot of them with your replies

Thanks in advance!

 

[cove]

When you apply for a loan you need to get your credit cards to zero balance.
You can pay all of the business taxes and personal taxes on a point and a half credit card with Amex. Do not believe any old stationery from the Australian Taxation Office that may say you cannot pay a bill on a credit card. That includes BAS,personal,company and HECS for anyone.
Read the Qantas summary on credit cards as it is helpful.

 

[elemist]

Thanks for the info Cove, having a good read through your blog posts and picking up quite a bit of info.

Anyone else have any good advice or info about the questions in my first post?

Cheers,

Elemist

 

[cove]

Banks have visibility of your credit cards.
If you miss a payment that can get reported on your credit file.
Make sure at the moment you apply for a mortgage loan your cards have zero balance to avoid reducing the loan offer.
Woolies Everyday rewards is still pretty good even though they halved the sign on points as the fee is only $89 and you get a point a dollar.
You do need to move to a better points earning card as neither Westpac nor ANZ have any long term value after the sign on when it comes to Visa or MasterCard.
If you are thinking Qantas points then their website has an excellent summary of credit cards (excluding the sign on bonuses as they can change).
I am currently building my credit file in America and I got marked down for not having a mortgage so some credit reporting and analysis can be a little weird. It is possible that stupid stuff can get on your credit file so if you ever get declined then get a copy of your file to read and then ask for corrections.
On Flyer Talk canceling credit cards can look like an occupation but personally I try not to do that except where my Big Four Bank has slashed the points earn to fatten their profits.

 

[casanovawa]

Cove, what's involved and how do you go about building a credit file in the State's so as to apply for a cc over there???

 

[cove]

If you have a look at the blog "Establishing A Credit Rating In America" that would be a start.
If you have a relationship with American Express they could help get you to their international department.

 

[SOPOOR]

Banks have visibility of your credit cards.
If you miss a payment that can get reported on your credit file.
Make sure at the moment you apply for a mortgage loan your cards have zero balance to avoid reducing the loan offer.

Unless things have changed in the last couple of years,

im pretty sure its not the balance on the credit cards thats even looked at

its the combined limit of all of your cards,

its so that bank can determine the risk you pose, and having a higher limit= higher risk of you going off the rails

 

[cove]

It can work like you say Sopoor especially when the borrower has a very low equity going into a mortgage.
I saw that 3.7% of mortgages are under water nationally (negative equity) but places like Brisbane are almost double the average.
Naturally lenders to Gold Coast apartments are being very cautious right now unless they already have the debt and want to turn it over.
Leaving credit cards unpaid at the due date is a sure fire way to the poor house.