Bad Credit Home Loans

Bad credit home loans can often feel like a fruitless search, particularly if you’re looking to buy a new house, refinance, or just get on the property ladder as a first time buyer.

You know that the chances of owning your own home with your current financial issues are slim, but a lot of the financial difficulties you’ve faced are through uncontrollable life events.

You might have suffered a sudden job loss, been through a tough separation or divorce or experienced a debilitating illness, such that you find you were no longer able to keep up with all your financial commitments.

There is, however, a light at the end of the tunnel. There are a number of lenders across Australia that have mortgage products for bad credit borrowers, no matter what their credit history might say.

These types of products are often referred to as “non-conforming” home loans, and can provide great flexibility in lending conditions.

Our guide below will take you through the process of how can you can get your bad credit home loan approved and other strategies to improve your credit score.


Understanding Bad Credit


Bad credit happens when you have one or more negative listings against your credit file, or you’ve got a low credit score.

It’s important that you monitor your credit score yourself, so that you stay informed and understand what each listing means.

Depending on the type of listing and how many you might have, it could reduce the chances of you getting a standard-type home loan with a lender significantly.


Bad Credit File Listings:


#1: Unpaid bills.


These will lead to a bad credit history faster than you can say “super-cag-a-fra-ga-listic-ex-pl-a-docious”! Keep on top of your payments and if you can’t, then communicate with the companies involved so that you can come to some type of payment arrangement that will stop these being listed on your credit file.


#2: Late payments.


These can affect your credit history, they won’t have as much of an impact as an unpaid bill. In fact, you can often get these removed from your credit history if you speak with the company involved and provide them with a valid reason why you were late.


#3: Prior credit rejections.


If you’ve been applying for home loans, personal loans or credit cards recently and have been declined, this can reflect badly against your credit file.  While they may be innocent, as in you decided not to go ahead, a lender reviewing your file would see this as a red flag.


#4: Bankruptcy.


There’s no avoiding this one. If you’ve been declared bankrupt, it will provide you with a bad credit rating and will remain on your credit file for between 5-7 years. And even if you have been discharged, your name will stay on a Solvency Index, which lenders have access to anytime they want.


Compare Bad Credit Home Loans


Bad Credit Home Loans Lenders


There are many lenders that specialise in helping those with bad credit access a home loan. Some of these are:

  • Adelaide Bank
  • Bluestone Mortgages
  • GE Money
  • La Trobe Financial
  • Pepper Home Loans
  • Resimac


We connect you with the right lender based on your specific circumstances and identify who will be able to offer you the best bad credit home loan rate available. Bad credit may not necessarily prevent you from getting a home loan, but there may be additional/different costs to pay.


Determining Your Eligibility


The fastest way to figure out if you qualify for a credit impaired home loan is to chat to one of our friendly home loan experts.

You’ll need to meet some, or all, of the following criteria in order to be considered someone who has “bad credit”:

  • If you can access a minimum deposit of 10% or have enough equity in your current property to be able to refinance, then you might be able to access a non-conforming home loan
  • You can pay all outside costs associated with your home loan as well as pay any stamp duty required
  • You can provide a guarantor for your home loan, but that doesn’t mean you can’t provide a deposit, you will still need to do this
  • You can provide proof that you are receiving an ongoing income to service your mortgage repayments. Unfortunately, if you are unemployed or rely solely on a pension, you won’t be able to access a home loan
  • You will need to declare any outstanding debts and consolidate these into your mortgage and pay them in full on settlement. These debts + your home loan cannot exceed the LVR set by the lender


Getting a Bad Credit Home Loan


Now that you understand things a little better, let’s figure out what you can do to increase your chances of getting approved for a credit impaired home loan.


#1: Review your credit history


Before you even begin the process of applying for any type of home loan, it’s important that you’re familiar with your credit file and understand what your credit rating means. Any lender you decide to apply to will review your credit file before approving your home loan. You want to have the knowledge and be able to deal with any negative marks against your credit file with confidence.


You can get a free copy of your credit file whenever you need to. This will also allow you to deal with any negative listings you weren’t aware of.


#2: Can a credit repair service help?


Did you know that some bad credit lists can be removed if they haven’t adhered to the relevant laws? The best way to figure this out is to chat with a credit repair specialist to see if there are any instances of these on your credit file.

If you’re able to remove these negative listings, then you might be able to access a regular home loan, avoiding higher fees and interest rates that are often associated with a bad credit home loan.


#3: Apply to a non-confirming lender


As we’ve already outlined, there are certain lenders that specialist in bad credit home loans.  They will not only look at your numbers, but they will also look at the circumstances surrounding your bad credit, take into account how much your earning as well as other factors. They are your best bet in getting approved for a home loan.


#4: Be upfront and honest


Don’t hide your bad credit history. Tell lenders about these issues before you begin the application process. Your mortgage broker can assist you with this and in some instances; a face-to-face meeting will work better, providing you the platform to explain your financial circumstances.


#5: Don’t forget about Lender’s Mortgage Insurance (LMI)


The wheels can fall off the wagon simply because an LMI provider rejected the application. Often, an LMI provider’s criteria are much stricter than that of your lender. It pays to keep this in mind. Chat with your mortgage broker about this and ensure that if LMI is required, that you’ll still be able to access a home loan.


Case Study: How a divorce resulted in a sliver lining


Kim had been married to her husband John for over 35 years.

Sadly, they divorced two years ago over unresolved differences. During the course of these two years, stress levels were high and the loss of John’s income (from when he moved out) caused Kim to fall behind on a number of her financial commitments, including her credit card and utility bills.

Following the finalisation of the divorce and family home sale, Kim to buy a small 2-bedroom apartment for her to live in that was close to her children and grandchildren.

Being in a senior role at her work, meant that her income was high — which would make her the ideal application for a home loan — but her credit score didn’t reflect this at all.

Kim got a copy of her credit file and together with a credit repair service, she was able to remove two of the five negative listings.

From there, she approached her mortgage broker who were able to put her in touch with a specialist lender who took into full account of her entire situation, before and after the divorce. They could clearly see that while there had been a slight glitch in her financial history, the rest of her file was perfect.

Four weeks later, Kim received pre-approval for a home loan and bought a modest 2-bedroom apartment and was able to get on with living her life.



Now that you know what impact having bad credit can having on achieving a home loan, you’re in a better position to make a plan and take the next steps in securing a bad credit home loan.

Chat to the team at Australian Credit and Finance about how we can help you find the right home loan for you, no matter what your credit history might say.

Talk to our friendly team of Australian Credit and Finance mortgage experts who can help you navigate your way through the process of buying a home, investing in property or refinancing your home loan. Call us today on 1300 735 557 to discuss your bad credit home loan options.