Short answer: One credit card usually isn't a problem, and if you've paid it on time it can help by building a repayment history. What matters most is the limit, not the balance: lenders generally assume you could max it out, so a high limit reduces how much they'll lend for a car.
Lenders assess the limit, not what you owe
When working out whether you can afford a car loan, most lenders count a notional monthly repayment on your credit card based on the full limit, commonly somewhere around 3% to 4% of the limit, even if the balance is zero. The exact figure depends on the lender.
| Card limit | Assumed monthly commitment (approx. 3% to 4%) |
|---|---|
| $2,000 | $60 to $80 |
| $10,000 | $300 to $400 |
| $20,000 | $600 to $800 |
A $20,000 limit you never use can therefore reduce your borrowing capacity by roughly what a modest car loan repayment would be. That surprises a lot of people.
How the card shows on your credit file
Australia uses comprehensive credit reporting, so your file shows your accounts, their limits and up to two years of monthly repayment history. Paying at least the minimum on time each month builds a positive record. A payment 14 or more days late can show as a missed payment for two years. If the account went further and was listed as a default, that stays for five years even after it's paid.
Each application for a card also leaves an enquiry on your file for five years. A card applied for recently, or several applications close together, can make a lender cautious.
Balance and behaviour also count
Lenders read your bank statements as well as your credit report. A card that's always near its limit, cash advances, or only ever paying the minimum can suggest you're relying on credit to cover everyday costs. A card that's paid down regularly tells the opposite story.
Practical steps before applying
- Consider lowering the limit. If you don't need a high limit, ask your bank to reduce it. The change usually takes effect quickly, but ask for written confirmation to show the lender.
- Close cards you don't use, after checking there are no fees or rewards you'll lose.
- Pay down the balance if you can, and keep making on-time payments.
- Avoid new credit applications in the months before you apply for car finance.
- Check your credit reports for free from the credit reporting bodies and fix any errors first. Moneysmart explains how.
Related guides
- How high credit card use affects approval
- Outstanding credit card debt and car loans
- Recently opened a new credit card?
Wondering how your credit card affects your borrowing? Tell us about your situation in about 60 seconds and a licensed broker will call you. No credit check to enquire.
General information only. This isn't financial advice. Finance the Ride is a referral service and doesn't hold an Australian Credit Licence. Last reviewed September 2026.
