How cashback credit cards impact your credit score

Thinking about applying for a cashback credit card and wondering if it will affect your credit score? It’s a smart question to ask before taking the next step.

A cashback credit card works like any other credit card when it comes to your credit score. The cashback feature itself doesn’t impact your credit profile; it’s simply an added benefit for cardholders. What does make a difference is how you use and manage the credit card.

Let’s take a closer look at how credit scores work, how a new card can affect yours, and answer some common questions we hear at MONEYME.

How credit scores work in Australia

You often hear the term ‘credit score’ in relation to loans or credit card applications, but what is it and how does it work? Your credit score is a number assigned to you that reflects how you’ve managed credit over time. In Australia, credit scores are calculated by two independent credit reporting agencies: Equifax (0 to 1,200), and Experian (0 to 1,000).

While each agency uses a slightly different score scale, the idea is the same. A higher score signals lower risk to lenders, while a lower score may make it harder to access credit or secure better rates.

Australia’s Comprehensive Credit Reporting (CCR) system has credit files that capture both positive and negative financial behaviour. Lenders can view 24 months of repayment history across all your credit accounts, including home loans, car finance, and credit cards. This information is used to assess borrowing risk and decide whether to approve credit applications.

Does applying for a new cashback credit card affect my credit score?

Yes, but only if you complete and submit a formal card application. When a lender assesses your application, they conduct a hard enquiry on your credit file. This is recorded on your report and can be seen by other lenders for five years. A single inquiry usually has a small impact, but multiple applications in a short period can raise concerns.

By contrast, checking your eligibility before you apply (known as a soft enquiry) doesn’t affect your credit score. It allows you to see your potential rate and credit limit before deciding whether to proceed with a formal application.

How a cashback credit card can help your credit score

A cashback credit card can help build a stronger credit profile when it’s used well. Here are a few ways it can work in your favour:

On-time repayments build a positive history

Under the CCR, every payment that’s made on time is recorded as a positive signal in your credit report. Paying the minimum repayment amount by the due date each month builds a consistent record of responsible financial behaviour that can lift your credit score.

Shows credit management

Having a credit card you actively use and repay on time shows lenders you can manage revolving credit responsibly. This is important if you're planning to apply for a home loan or car loan in the future. A well-managed card repayment schedule over 12 to 24 months is proof of financial reliability.

Adds to your credit mix

Having a mix of credit types creates a marginally positive impression for your credit score. It shows lenders you’re able to manage different types of credit.

How your credit card can work against your credit score

Missing or late payments

Missing or late repayments have the biggest impact on your credit score. Under CCR, a missed payment that’s more than 14 days old is recorded on your credit file and visible to lenders for up to two years. A single late payment on a clean file can drop your credit score by 50 to 100 points, depending on the agency. Setting up a direct debit for your minimum repayment can help you stay on track and protect your history.

High credit usage

Credit utilisation is the percentage of your available credit limit you’re using. For example, using $4,500 of a $5,000 limit means you’re at 90% utilisation. If you’re regularly carrying a high balance, even if it’s paid off monthly, the balance recorded at the reporting date can signal financial stress to lenders. A good rule of thumb is to keep your usage below 30% of your limit where possible.

Multiple credit card applications

Each formal credit card application creates a hard inquiry on your credit file. Applying for several credit cards in quick succession can raise concerns with lenders about your credit behaviour.

Spacing out your applications or only proceeding when you’re ready can help avoid unnecessary impact. Opening and closing multiple cards quickly (sometimes called credit card churning) can also reduce the average age of your accounts, which lenders may also take into account.

How to use your cashback credit card to build credit

Beyond just avoiding mistakes, here are proactive strategies to make your cashback credit card work harder for your credit score:

The 1% rule for utilisation

Keep your credit utilisation below 1% of your credit limit if possible. For example, on a $5,000 limit, try to keep your balance below $50. This can give your score an extra boost, as the lowest utilisation brackets often see the highest scores.

Set up automatic payments strategically

Set up automatic payments for more than the minimum amount due. This ensures you never miss a payment and also reduces your balance faster. Even an extra $25 per month can make a meaningful difference to your credit utilisation over time.

Use the card regularly but predictably

Credit scoring models prefer to see consistent, moderate use rather than sporadic, large purchases. Use your cashback credit card for one regular expense like groceries or fuel, then pay it off in full each month. This creates a steady pattern of responsible use.

Monitor your credit score monthly

Checking your credit score every few months helps you track how your responsible card use translates into credit score improvements over time. Watching your score improve will motivate you to maintain good habits and help you spot any issues early.

Commonly asked questions about credit cards and scores

At MONEYME, we hear a lot of similar questions about credit scores. Here are a few of the most common:

Will checking my credit score hurt it?

Checking your credit score is considered a soft inquiry and doesn’t affect your score. Regularly monitoring your score is one of the best ways to stay on top of your credit health and helps you manage any unexpected events.

Will the cashback I earn improve my credit score?

Cashback rewards don’t affect your credit score. Your score is determined by repayment behaviour, credit utilisation, enquiry history, and other financial factors, not the rewards you earn on your spending.

Will closing an unused credit card help my score?

Closing a card reduces your available credit, increases your utilisation ratio and potentially lowers your score. If the card has a long positive repayment history, closing it also shortens your average account age. Consider the effects carefully, as the fee savings might not be worth the credit profile impact.

Do I need a credit card to have a credit score?

No, you don’t need to have a credit card. Any credit product you take out will contribute to your credit score, such as a car, home or personal loan. However, a credit card used responsibly is one of the most accessible ways to build positive credit history, particularly earlier in your credit journey. Regular on-time repayments on a modest limit are a practical way to establish a strong track record to show lenders.

Ready to build your credit with a cashback credit card?

Understanding how credit cards impact your score is just the first step. The MONEYME Cashback Rewards Credit Card lets you earn 1% cashback on everyday purchases while building a positive credit history through consistent on-time payments.

Check your personalised rate and credit limit before you apply, with no impact on your credit score. Once approved, your digital card is ready to use in as little as 60 minutes.

Find out more about the MONEYME Cashback Rewards Credit Card