You want to buy a home, but there is something on your credit report that has been worrying you.
Maybe you missed a few repayments during a difficult period. Maybe an old phone bill became a default. Or perhaps you had a personal loan that fell behind after losing your job.
Now you are wondering whether a bank will give you a home loan.
The answer is often yes. But what happened, when it happened, whether it has been resolved and how you have managed your finances since then all matter.
A default or poor credit history does not automatically mean you cannot buy a property.
It does mean you need to be more careful about which lender you approach and when you apply.
Some borrowers may still qualify with a mainstream lender. Others may need a specialist lending solution. And for some, waiting and improving their credit position may be the better approach.
This guide explains how Australian lenders assess credit impairment and what you can do before submitting a home loan application.
Can You Get a Home Loan With a Default or Bad Credit?
Yes, it may be possible to get a home loan with a default, low credit score or previous credit problems in Australia.
However, approval depends on your overall circumstances and the lender's policy.
Lenders may consider:
- The type of credit problem.
- The amount involved.
- How recently it occurred.
- Whether the debt has been paid or resolved.
- Your repayment conduct since the event.
- Your current income and employment.
- Your deposit and available property equity.
- Your existing debts and living expenses.
A small paid telecommunications default from several years ago is a different proposition from recent mortgage arrears or multiple unpaid personal loans.
The lender will assess the complete picture, not just the existence of a default.
You do not necessarily need a specialist bad credit lender simply because a default appears on your credit report. Some mainstream lenders may consider certain credit impairments, depending on their policies. Checking those options first could make a significant difference to the cost of your loan.
If you are a first home buyer, a default does not automatically exclude you from government assistance. You still need to meet the relevant lender's credit assessment requirements, but it is worth understanding what support may be available. Our guide to first home buyer government schemes, grants and concessions explains the deposit assistance and other programs available to eligible Australian buyers.
What Does Credit Impairment Actually Mean?
Credit impairment is a broad lending term used to describe adverse information in a borrower's credit history.
It is not one single category with one set of rules.
Payment Defaults
An overdue debt that has been formally listed on a credit report after the required conditions and notices have been met.
Late Repayments
A history of repayments made after their due dates, even where no formal default has been listed.
Financial Hardship
Previous repayment difficulties or formal hardship arrangements with a credit provider.
Serious Credit Events
Events such as court judgments, serious credit infringements, debt agreements or bankruptcy.
These issues do not all carry the same weight with lenders.
A temporary difficulty that has been resolved may be assessed differently from a continuing pattern of missed repayments.
What Information Appears on Your Australian Credit Report?
Before worrying about whether you can get a mortgage, you need to know exactly what is recorded.
Australian credit reports can include credit accounts, repayment history, credit enquiries, defaults and certain serious financial events.
How long does negative information stay on your report?
| Credit Information | Usual Reporting Period |
|---|---|
| Payment default | 5 years from listing |
| Repayment history | 2 years |
| Credit enquiry | 5 years |
| Financial hardship information | 1 year |
| Court judgment | 5 years |
| Serious credit infringement | 7 years |
| Bankruptcy | 5 years from bankruptcy or 2 years after discharge, whichever is later |
These are general Australian consumer credit reporting retention periods. The treatment of particular information can depend on its classification and the applicable law.
You can read the official retention rules on the Office of the Australian Information Commissioner website .
What is a credit default?
For a consumer payment default to be listed, the overdue amount must generally be at least $150 and at least 60 days overdue.
The credit provider must also comply with the applicable notification requirements.
This means an ordinary missed payment does not automatically become a formal default on your credit report.
However, a missed repayment may still appear in your repayment history information.
What about repayment history?
Repayment history shows whether payments on eligible credit accounts were made on time over the reporting period.
A recent pattern of late repayments can concern a lender because it may indicate ongoing difficulty managing financial commitments.
Even if an old default has been paid, recent missed repayments may affect the overall assessment.
Do credit enquiries matter?
Yes. Credit enquiries can show when you have applied for credit.
Several recent applications may prompt a lender to ask whether you have been seeking additional borrowing or experiencing financial pressure.
An enquiry does not automatically mean an application was declined.
If you have already experienced credit problems, submitting applications to several lenders without checking their policies can make your position more complicated. Before applying, read our guide explaining how home loan applications can affect your credit score.
How Do Lenders Assess a Default on Your Credit Report?
There is no single rule that every Australian lender follows.
Some lenders have strict credit history requirements. Others may consider particular types of defaults where the circumstances are acceptable.
1. What type of debt was it?
A telecommunications or utility default may be assessed differently from a default on a personal loan, credit card or mortgage.
Mortgage arrears can be particularly significant because they relate directly to a borrower's ability to manage housing debt.
2. How much was the default?
A small default may present a different risk from a substantial unpaid debt.
But there is no universal dollar amount below which every lender will ignore a default.
Even a relatively small default can matter if it is recent or part of a broader pattern.
3. How long ago did it happen?
Time can help demonstrate that a previous problem is no longer affecting your financial position.
A default from four years ago followed by consistent repayments may be viewed differently from a default listed six months ago.
However, older does not automatically mean acceptable.
4. Has the debt been paid?
A paid default may be viewed more favourably than an unpaid one because the outstanding obligation has been resolved.
Some lenders may require defaults to be paid before considering an application.
5. Why did it happen?
Sometimes a default follows a difficult period of life. Examples include:
- Unexpected unemployment.
- Serious illness or injury.
- Relationship separation.
- Business closure or financial loss.
- A disputed account or billing error.
- A temporary period of financial hardship.
A clear explanation, supported by documents where available, may help a lender understand what happened. It does not guarantee approval.
6. What has happened since?
Have you made your repayments on time? Have you reduced your debts? Are you managing your expenses comfortably? Do you now have stable employment and savings?
Your more recent financial conduct can help demonstrate whether the previous issue has been resolved.
Can You Get a Home Loan With a Paid Default?
Potentially, yes.
Paying a default does not automatically remove it from your credit report.
The listing generally remains for five years from the original listing date.
However, the credit provider should update the record to show that the default has been paid.
That distinction can be important when lenders assess the application.
What if the default is still unpaid?
An unpaid default can significantly limit the lenders willing to consider your application.
Before making a payment, confirm the debt is genuine and the amount is correct.
If you cannot afford to pay it, speak with the credit provider about available arrangements.
If the debt is disputed or you are unsure about your legal obligations, consider independent financial or legal assistance before making an agreement.
Paying an accurate default does not give you a right to have it deleted. Be cautious of companies promising to remove legitimate negative credit information in exchange for a fee.
Mainstream, Near Prime and Specialist Home Loans: What Is the Difference?
Home lending is not simply a choice between approval and decline.
Different lenders have different risk appetites, credit policies and pricing.
The following categories are useful for understanding the market, although they are not formal regulatory classifications.
| Lending Category | General Approach | Potential Trade Off |
|---|---|---|
| Mainstream lenders | Typically prefer stronger credit histories, although some may consider limited or older impairment. | Potentially more competitive rates and features, subject to eligibility. |
| Near prime lending | May accommodate some credit issues that fall outside mainstream policy. | Rates, fees or lending conditions may be less competitive. |
| Specialist lending | May consider more substantial or recent credit impairment, depending on the lender. | Potentially higher rates, fees, deposit requirements or restrictions. |
Why you should not automatically choose a specialist lender
Imagine you have an old, paid phone default. You have worked steadily for several years, saved a deposit and maintained your other repayments.
You might assume that a specialist lender is your only option.
But a mainstream lender may still be worth assessing against its current policy.
Moving straight to a more expensive product without checking other options could cost you more than necessary.
On the other hand, where the impairment is significant, a specialist loan may be the realistic option.
The objective is to find an appropriate lender based on the facts, not assumptions.
What Credit Score Do You Need for a Home Loan in Australia?
There is no single minimum credit score that applies to every Australian mortgage lender.
Credit scores can differ between reporting bodies because they use different information and scoring models.
A lender may use your credit score as part of its assessment, but it may also examine the underlying credit report.
That means two people with similar credit scores could receive different lending outcomes.
For example, one person might have a low score because of multiple recent credit enquiries.
Another might have recent mortgage arrears and an unpaid personal loan default.
The score alone does not explain the difference in risk.
Should you wait until your credit score improves?
Not necessarily.
If your credit report shows an old, isolated issue and your current financial position is strong, there may be lenders willing to assess your application.
However, if your score reflects recent missed repayments or ongoing financial difficulty, addressing those problems first may improve your options.
The goal is not simply to reach a particular score. It is to demonstrate a financial position that meets the lender's requirements.
Three Examples of How Credit Problems Can Affect a Home Loan
These examples are hypothetical, but they illustrate why credit impairment needs to be assessed individually.
Scenario 1: An Old Paid Phone Default
A first home buyer has a $650 telecommunications default listed four years ago.
The debt was paid, and there have been no further missed repayments.
The buyer has stable employment, a reasonable deposit and manageable living expenses.
Possible outcome: Some mainstream lenders may be worth considering, subject to their policies and the full application.
A specialist lender may not necessarily be required.
Scenario 2: A Recent Personal Loan Default
A borrower has a $7,000 personal loan default listed nine months ago.
The debt has since been paid, but there are also several recent late repayments.
The borrower now has stable employment.
Possible outcome: Mainstream lending options may be limited. A specialist lender may be considered, or it may be better to establish a longer period of consistent repayment conduct before applying.
Scenario 3: Previous Financial Hardship
A couple experienced a period of reduced income following a serious illness.
They entered a formal hardship arrangement with their lender and later returned to normal repayments.
They have maintained their commitments since then.
Possible outcome: The lender may examine the hardship arrangement, repayment history and current financial position.
A documented and resolved hardship period may be assessed differently from continuing arrears.
None of these scenarios guarantees approval. The lender must still assess income, expenses, debts, deposit, property security and credit history.
How Much More Can a Specialist Home Loan Cost?
A specialist home loan may provide an option where mainstream lenders are unable to approve an application.
However, the interest rate and fees can be higher.
Even a small difference in interest rate can meaningfully affect repayments.
Illustrative Comparison: $600,000 Home Loan
Assume a $600,000 loan over 30 years with principal and interest repayments.
| Interest Rate | Approx. Monthly Repayment |
|---|---|
| 6.00% p.a. | $3,597 |
| 8.00% p.a. | $4,403 |
| Difference | About $806 per month |
That is approximately $9,672 more in repayments over the first 12 months, assuming both rates remain unchanged.
This illustrates why it is worth checking mainstream options before committing to a more expensive specialist loan.
Rates are hypothetical and do not represent current lender offers. Calculations assume monthly repayments and a constant interest rate, excluding fees and other costs. The figures are illustrative, not a product comparison or quotation.
Interest rates are not the only consideration.
Specialist loans may also involve different establishment fees, ongoing fees, features or restrictions.
The comparison should consider the total cost of the loan and whether the structure suits your circumstances.
Can You Refinance From a Specialist Lender to a Mainstream Bank Later?
Potentially, yes.
A specialist home loan does not necessarily need to be permanent.
Some borrowers use specialist lending while their credit history improves, then consider refinancing later.
However, refinancing is not guaranteed.
The new lender will assess your circumstances at the time, including:
- Your current credit report.
- Your repayment history on the specialist loan.
- Your income and expenses.
- Your existing debts.
- Your property's current value.
- Your remaining loan balance.
- The lender's credit policy.
Why the exit strategy matters
If a specialist loan is being considered, it is worth thinking about the possible refinancing pathway before the loan is established.
For example, you may want to know:
- When will the default stop appearing on your credit report?
- How much equity might be required to refinance?
- What repayment history will a mainstream lender want to see?
- What discharge, break or other fees could apply?
- What happens if property prices fall?
A default disappearing from your credit report does not automatically make you eligible for mainstream finance.
You still need to meet the new lender's requirements.
If you already have a specialist mortgage, our home loan refinancing guide explains the process and considerations when reviewing your existing loan.
If a specialist loan is appropriate, the long term plan should consider how you may improve your financial position and what conditions would need to be met before refinancing. There is no guarantee that refinancing will be available at a particular time.
How Much Deposit Do You Need for a Home Loan With Bad Credit?
The deposit required depends on the lender, the property and your overall credit profile.
A borrower with strong credit history may have access to lower deposit options that are not available to someone with significant impairment.
Some specialist lenders may require a larger deposit or restrict the maximum loan to value ratio.
A larger deposit can reduce the lender's exposure, but it does not automatically overcome serious credit issues.
Can a guarantor help if you have bad credit?
A family guarantee may help with deposit or security requirements, but it does not erase a default or remove the lender's need to assess your repayment capacity.
It also places a financial obligation on the guarantor and may put their property at risk.
If you are thinking about asking your parents to help, read our guide to guarantor home loans and what you are asking your family to risk before making that decision.
Can you use a government deposit scheme?
A credit default does not necessarily prevent you from meeting the eligibility rules of a government deposit scheme.
However, participating lenders must still assess your credit history and ability to repay the loan.
Government assistance does not guarantee mortgage approval.
Can You Get a Joint Home Loan if One Applicant Has Bad Credit?
Potentially, yes.
If you are buying with a partner, the lender will generally assess both applicants' financial circumstances.
That may include both credit reports, incomes, debts and living expenses.
A strong credit history for one applicant does not automatically cancel out the other applicant's credit problems.
The lender may consider the nature of the impairment, how recently it occurred and whether the issue has been resolved.
Should you apply in one person's name instead?
Sometimes couples consider applying in the name of the person with the stronger credit history.
That may be possible in some circumstances, but it can affect borrowing capacity, property ownership and other legal or financial considerations.
Some lenders may also require particular arrangements where the property is jointly owned.
It is important to obtain appropriate legal advice about ownership and consider the full lending position before choosing this approach.
What if the Default on Your Credit Report Is Wrong?
Credit reports are not always accurate.
A default may be listed against the wrong person, show an incorrect amount or contain other errors.
If you believe information is incorrect, you have the right to request a correction.
How do you dispute an incorrect default?
- Get a copy of your credit report. Identify the credit provider and the information you believe is wrong.
- Collect supporting evidence. This might include payment receipts, bank statements, correspondence or evidence of a dispute.
- Request a correction. Contact the credit reporting body or the credit provider responsible for the information.
- Follow up in writing. Keep records of your request and the responses.
- Escalate if necessary. If the issue is not resolved, consider the relevant complaints process and external dispute resolution options.
You can read about your credit reporting rights through the Office of the Australian Information Commissioner .
Should you pay a credit repair company?
Be cautious.
You can request corrections to inaccurate credit information yourself.
A company cannot legitimately guarantee the removal of accurate negative information simply because you pay a fee.
If you need help understanding your rights, consider an independent financial counsellor or an appropriate consumer assistance service.
What Should You Do Before Applying for a Home Loan With Bad Credit?
If you have a default or other credit impairment, preparation can make a meaningful difference.
- Obtain your credit reports. Check the information held by the major Australian credit reporting bodies. Requesting your own report does not create a lender credit enquiry.
- Identify every credit issue. Record the type, amount, listing date and payment status of each default or other adverse event.
- Check for errors. Dispute genuinely incorrect information and allow time for the correction process.
- Address outstanding debts. Where appropriate, consider resolving unpaid defaults or arranging manageable repayments. Do not ignore financial hardship.
- Build a consistent repayment record. Make existing repayments on time and avoid taking on unnecessary new debt.
- Prepare an explanation. If the credit problem resulted from a particular event, document what happened, when it ended and how your financial position has changed.
- Review your deposit and expenses. A lender will still assess your ability to manage the proposed mortgage.
- Check lender policy before applying. Avoid submitting applications simply to see whether a lender will approve you.
What about home loan preapproval?
If you are planning to buy a property, understand that preapproval is generally conditional.
A lender may still need to complete further checks, including reviewing credit history and the property security.
Our guide to conditional and unconditional home loan approval explains the difference before you commit to a purchase.
Should You Apply Now or Wait for Your Credit History to Improve?
This is often the most important decision.
Applying immediately is not always the best approach.
But waiting several years without checking your options may also be unnecessary.
| Your Situation | What May Be Worth Considering |
|---|---|
| Old, isolated and paid default with clean recent conduct | Review whether mainstream lenders may consider the application. |
| Recent paid default with stable income | Compare current lender policies and the benefit of waiting. |
| Multiple unpaid defaults | Address outstanding debts and seek assistance if needed before applying. |
| Recent mortgage arrears | Establish sustainable repayment conduct and review specialist or future options. |
| Incorrect default | Request correction before submitting a mortgage application. |
| Previous bankruptcy or serious credit event | Obtain a detailed assessment of the event, current status and lender eligibility. |
A stronger credit history is only one part of home loan approval.
Your income, living expenses, existing debts, deposit and property value also matter.
If you are working out what may be affordable, our home loan calculators can help you estimate repayments and explore different borrowing scenarios.
Remember that a calculator provides an estimate, not a lending decision.
Would applying today give you access to a suitable loan, or could waiting and improving your credit position result in materially better options? The answer depends on your individual circumstances and the lender's current policy.
Where Can You Check Your Credit Report and Get Help?
Before applying, consider checking your credit information directly with the reporting bodies.
You can generally request access to your consumer credit report free of charge at least once every three months, subject to the applicable rules.
For independent information about credit reports and your rights, visit ASIC Moneysmart .
If you are struggling with debt or repayments, the National Debt Helpline provides free financial counselling.
How Triple O Finance Can Help if You Have a Default or Credit Impairment
Having a default does not automatically mean you need a specialist lender.
Before submitting an application, we can review the circumstances surrounding your credit history and compare relevant lender policies.
That includes checking whether a mainstream lender may consider your application, whether specialist lending is appropriate, or whether improving your credit position first could lead to a better outcome.
We can also help you understand how your deposit, income and existing debts may affect the assessment.
If specialist lending is being considered, we can discuss the potential costs and what a future refinancing pathway might involve.
The objective is to understand your realistic options before creating unnecessary credit enquiries.
Have a Default and Not Sure if You Can Get a Home Loan?
You do not need to guess which lenders might consider your circumstances. We can review your credit history, income and deposit, then explain the lending options that may be available before an application is submitted.
Get a Free Assessment
Written by Ashish Shrestha
Co-Founder, Director & Senior Mortgage and Finance Broker
Triple O Finance
Ashish co-founded Triple O Finance in 2018 and brings a 12-year background in policing to his work in mortgage and finance broking. He helps Australian borrowers, including emergency services professionals and first home buyers, understand lending policies and make informed decisions about their finance options.
