Bad Credit Home Loans
Bad credit doesn’t mean the end of your home loan journey. We’re here to connect you with lenders who understand and are ready to assist.
What Is Considered A Bad Credit Score?
In Australia, if your credit score is below 500, it’s seen as bad credit — and anything under 400 is considered very bad. The average Equifax score is typically around 550.
Bad Credit Home Loan Options
If you’ve had credit issues in the past, there are still a number of home loan solutions available in Australia. Below are some common types of bad credit home loans tailored for different financial situations:
Home Loans with Defaults
These loans are designed for borrowers who have defaults listed on their credit file. Australian lenders generally classify defaults into two types:
Paid Defaults – These have been settled in full.
Unpaid Defaults – These remain outstanding.
A default typically refers to an overdue debt such as a personal loan, credit card, phone bill, or utility bill. It’s considered a default if the payment is 60+ days late or the lender has been unable to reach you.
Defaults can lead to rejections from major banks, as they’re seen as indicators of financial risk. However, some specialist lenders are willing to consider your application.
Discharged Bankrupt Home Loans
These loans are suitable for borrowers who have previously declared bankruptcy and have since been discharged. In Australia, there are lenders that may consider your loan application immediately after your bankruptcy is discharged.
Being discharged means you’ve been released from the legal obligations of bankruptcy — you can travel freely, rebuild your finances, and apply for credit again.
Part IX Debt Agreement Loans
If you’ve entered and completed a Part IX Debt Agreement, some lenders will still consider your home loan application.
A Part 9 Agreement is a formal deal between you and your creditors, often facilitated by a debt agreement administrator. Once fulfilled, you’re discharged from the agreement. However, it remains on your credit file for five years or more, potentially affecting your borrowing capacity.
Tax Debt Home Loans
Tax debt with the Australian Taxation Office (ATO) is more common than you might think. If you owe the ATO, some lenders allow you to consolidate this debt into your home loan, helping you manage repayments more easily.
These loans help clear your tax liability and simplify your financial obligations.
Debt Consolidation Home Loans
If you’re juggling multiple debts — like credit cards, personal loans, or car finance — a debt consolidation home loan could help. These loans allow you to combine various debts into your mortgage, resulting in a single, lower monthly repayment.
This option is ideal for regaining control over your finances and reducing interest costs in the long run.
Bad Credit? Chat with a mortgage expert. We got you Covered.
How Much Can I Borrow With Bad Credit?
Your borrowing power with bad credit depends on the nature and extent of your credit issues. Here’s a general guide based on different credit scenarios:
Small Paid Defaults
If the defaults are under $500 and were paid over 6 months ago, you may be eligible to borrow up to 90% LVR, or in strong applications, up to 95% of the property value.Multiple Small Paid Defaults
If you have under $1,000 in paid defaults from banks and under $500 from other providers (e.g. phone or utility companies), borrowing up to 85–90% of the property value may be possible.Moderate Paid Defaults (Up to $3,000)
Depending on the lender:Prime lenders may approve up to 80% LVR
Specialist lenders may offer up to 90%
With a guarantor, you could potentially borrow up to 100%
Large Paid Defaults ($3,000–$500,000)
These are assessed case-by-case. If you provide a solid explanation and supporting documentation, borrowing up to 90% with a specialist lender may be possible.Unpaid Defaults
Some non-conforming lenders may allow borrowing up to 90%, though most will expect these defaults to be paid before loan approval.Judgements or Court Writs
Loans of up to 90% LVR may be considered by non-conforming lenders, even with court judgements or writs on your file.Part IX Debt Agreements & Bankruptcy
For borrowers discharged from bankruptcy or with completed Part IX agreements, borrowing is still possible. Please refer to our broker, we are here to help you.
Common Mistakes to Avoid When Applying for a Bad Credit Home Loan
When applying for a home loan with bad credit, being mindful of common mistakes can improve your chances of approval and protect your financial wellbeing. Here are key pitfalls to watch out for:
❌ Mistake 1: Not Reviewing Your Credit Report:
Before you apply, always check your credit report for errors or outdated information. Even minor inaccuracies can negatively impact your score and your application. Correcting these early can help improve your credit profile and boost lender confidence.
❌ Mistake 2: Applying with Multiple Lenders at Once:
Submitting multiple loan applications in a short time can harm your credit score. Each application triggers a credit inquiry, which may lower your score and signal financial desperation to lenders. Instead, research your options carefully and apply only to the most suitable lender.
❌ Mistake 3: Ignoring Existing Debt Obligations:
Staying on top of your current debts—such as credit cards, personal loans, or buy-now-pay-later accounts—is crucial. Missed or late payments can further damage your credit score and decrease your loan eligibility.
❌ Mistake 4: Overlooking Loan Details:
Don’t focus solely on getting approved—take time to understand the loan’s terms and conditions. Pay close attention to:
Interest rates
Fees and charges
Repayment schedules
Jumping into a loan without reviewing the details could result in higher costs or financial stress later on.
Why Choose Clear Route?
01
Free Consultation
Enjoy free consultation with professional mortgage broker in every circumstance.
02
Expert Broker Support
Your friendly broker will help you choose the home loan, supporting you every step of the way.
03
Best Lender Selection
Our mortgage brokers will help you find best deal by comparing 30+ lenders.
Frequently Asked Questions
What does a mortgage broker do?
A mortgage broker helps you find the right home loan. We will compare loans from many different lenders, explain confusing terms, and handle the paperwork for you. Best of all, their service is free because they get paid by the lenders, not you.
How much deposit do I need?
Most banks prefer a 20% deposit to avoid extra costs like Lenders Mortgage Insurance (LMI). But if you don’t have that much, you might still buy with as little as 5% using government schemes like the First Home Guarantee or with help from a family guarantor.
How much can I borrow?
The bank looks at your income, expenses, and debts to decide how much you can afford. A mortgage broker can give you a realistic estimate before you start house hunting.
Should I choose a fixed or variable rate?
A fixed-rate loan keeps your repayments the same for a set time (1–5 years), which is good for budgeting. A variable rate can go up or down but often has more flexibility, like extra repayments. A broker can help you decide which suits you best.
What other costs are there besides the loan?
Buying a home comes with extra costs like stamp duty (a government tax), legal fees, and building inspections. Some states waive stamp duty for first-home buyers, so ask your broker.