Getting a Mortgage with Bad Credit in Australia

A less-than-perfect credit history does not automatically disqualify you from getting a home loan. It narrows your options and raises the cost of borrowing, but specialist lenders exist precisely for this situation. Here is what you need to know before applying.

Credit Score Thresholds in Australia

Three credit reporting agencies operate in Australia: Equifax, illion, and Experian. Each uses a different scale:

• Equifax (0–1200): Below 500 is poor; 500–699 is fair; 700–799 is good; 800+ is excellent
• illion (0–1000): Below 300 is poor; 300–499 is fair; 500–699 is good; 700+ is excellent
• Experian (0–1000): Below 550 is poor; 550–699 is fair; 700–799 is good; 800+ is excellent

Mainstream lenders (Big Four banks, Macquarie, ING) typically require good-to-excellent scores. Below 500 on Equifax is where most mainstream banks decline outright, though the individual credit file history matters as much as the score itself.

What Counts as Adverse Credit

• Default: A debt of $150+ overdue by 60+ days, listed after notice to you. Stays on file 5 years.
• Court judgment: A court order to repay a debt. Stays on file 5 years.
• Serious credit infringement: A default where the creditor cannot locate you. Stays 7 years.
• Bankruptcy: Stays on file 5 years post-discharge (and permanently on the NPII).
• Repayment history: Under comprehensive credit reporting (CCR), lenders see 24 months of on-time or late payments. Even one or two late payments are visible.

Getting Your Credit Reports for Free

You are entitled to one free report per year from each agency. Get all three — lenders may check any of them, and errors appear more often than you would expect. Check via equifax.com.au, checkyourcredit.com.au (illion), and experian.com.au. If you find errors or incorrect defaults, dispute them directly with the agency — removing a legitimate error can significantly improve your score.

Specialist Lenders for Bad Credit

When mainstream banks decline, specialist non-bank lenders are the primary option:

• Pepper Money — tiered products based on the severity of credit issues, widely available through brokers
• Liberty Financial — flexible assessment criteria for impaired credit histories
• Bluestone Mortgages — products for borrowers with defaults and other adverse events
• La Trobe Financial — known for lending where mainstream banks decline
• Resimac — non-bank lender with a dedicated impaired credit range

Specialist lending costs more: expect rates 1–4% above standard variable rates, higher establishment fees, and maximum LVRs often capped at 80%. On a $500,000 loan over 30 years, a 2% rate premium adds approximately $200,000 in total interest. Repairing credit before applying — even if it takes 12–24 months — often produces a better financial outcome.

Waiting Periods

• Small paid defaults (<$1,000): some specialist lenders consider immediately
• Larger paid defaults: typically 12–24 months after payment
• Unpaid defaults: most lenders require them cleared before considering any application
• Court judgments: typically 12–24 months after resolution
• Bankruptcy: specialist lenders from 2 years post-discharge; mainstream banks from 5+ years

Steps to Repair Your Credit

• Pay all outstanding defaulted debts — a paid default is better than an open one
• Set up direct debits for all recurring bills so nothing slips past due
• Reduce credit card limits — unused limits still affect your score and borrowing capacity
• Avoid new credit applications for at least 12 months before applying for a mortgage
• Build 24 months of clean repayment history — comprehensive credit reporting makes this directly visible to lenders

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