Bad Credit Mortgage Australia: Your Options in 2026

Quick Answer: Yes, you can get a mortgage with bad credit in Australia through non-conforming lenders like Pepper Money, La Trobe Financial, Bluestone, and Resimac. But rates run 2–4% above mainstream, adding $200,000–$400,000 in interest on a typical loan. If your defaults were listed in breach of the Privacy Act 1988 — which is surprisingly common — professional removal in 30–90 days unlocks mainstream lending and eliminates that premium entirely.

A bad credit mortgage is real — specialist lenders genuinely do approve applications that the big four banks automatically decline. The question worth asking before you sign isn't whether it's possible. It's whether it's your best option.

For many Australians, the answer is no — because the defaults blocking their mainstream approval were listed unlawfully and can be removed. For others, a specialist mortgage is the right move now with a clear path to refinancing later. This guide covers both paths clearly.

Who Offers Mortgages With Bad Credit in Australia?

Australia has an active non-conforming lending market with several specialist lenders who build products specifically for impaired credit applicants:

These lenders assess beyond the credit score — income stability, equity position, employment history, and the nature of the credit event all factor in. A default from a redundancy three years ago is viewed differently from a pattern of ongoing defaults.

The True Cost of a Bad Credit Mortgage

Even if you refinance after two or three years, the early repayments at a higher rate represent a real and substantial cost. Run the numbers before you commit.

Real Case Study: Tran, Parramatta — 47 Days to a Mainstream Mortgage

Tran, 38, a logistics manager from Parramatta, had been quoted 9.4% p.a. by a non-conforming lender on a $590,000 home loan. The blocking entry was a $980 default from an energy company, listed 18 months earlier during a period of COVID-related financial difficulty.

What Tran didn't know: the energy company had listed the default while his formal hardship arrangement — requested in writing — was still in place. Under the Credit Reporting Code, listing a debt while a compliant hardship arrangement is active is a breach of the code.

ACS challenged the listing. The energy company acknowledged the breach within 14 days. The default was removed on day 28. Tran's Equifax score moved from 469 to 711.

Result: Tran's Equifax score moved from 469 to 711 in 28 days. His mortgage broker resubmitted to a major bank — approved at 6.31% p.a. On a $590,000 loan over 30 years, the difference between 9.4% and 6.31% saved approximately $337,000. He waited 47 days from first contacting ACS to unconditional approval. He only paid when we succeeded. Subject to individual assessment; results may vary.

Steps Before Applying for a Bad Credit Mortgage

1. Pull all three credit reports — Equifax, Experian, Illion
2. Identify every negative entry on the file
3. Get a free ACS assessment within 24 hours
4. If removal viable — pursue before applying anywhere
5. If not viable — engage a specialist mortgage broker
6. Prepare documentation: 2yr tax returns, 6mo bank statements, deposit evidence

Should You Apply Now or Fix First?

Apply now if: the purchase is genuinely time-sensitive, the default is lawfully listed, or the specialist rate is still affordable within your long-term plan.

Fix first if: there's any flexibility in your timeline and there's any possibility the default was listed unlawfully. A free assessment answers that question within 24 hours at no cost.

Frequently Asked Questions

Can I get a mortgage in Australia with active defaults? Yes — through non-conforming specialist lenders who assess impaired credit applications. Major banks will typically decline automatically. The rate premium on specialist mortgages is significant, so it's worth first checking whether any defaults can be removed under the Privacy Act 1988 before committing.

How much deposit do I need for a bad credit mortgage in Australia? Non-conforming lenders typically require 20% (80% LVR or lower) for impaired credit applicants, compared to the 5–10% some mainstream lenders accept for clean-credit borrowers. A larger deposit partially offsets the lender's risk from your credit history.

Can I refinance from a bad credit mortgage to a mainstream one later? Yes — and this is a common strategy. Obtain specialist financing now, spend 12–24 months re-establishing your credit profile and demonstrating repayment history, then refinance to mainstream lending. Get a clear timeline from a broker before committing.

Do non-conforming lenders check credit scores? Yes — they access the same credit bureau data as mainstream lenders. The difference is they apply manual assessment rather than automatic decline rules, so a human reviews your full situation. Having a detailed explanation of your credit events and evidence of changed circumstances strengthens your application.

Is it legal for credit repair companies to challenge mortgage-blocking defaults? Yes — ASIC-licensed credit repair companies are legally permitted to dispute inaccurate or unlawfully listed credit file entries on your behalf under the Privacy Act 1988. See more about default removal services →

How long does a bad credit mortgage take to approve in Australia? Non-conforming lenders typically take 3–7 business days for initial assessment, with full approval in 2–4 weeks. This is slightly longer than mainstream lenders due to the manual assessment process. Factor this into your purchase timeline.

Find Out If Your Mortgage Blocker Can Be Removed

Before accepting a specialist rate or giving up on property ownership, get a no-obligation assessment. It's free, takes minutes, and could be worth hundreds of thousands of dollars.

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This article provides general information only and does not constitute legal or financial advice. Australian Credit Solutions Pty Ltd holds ASIC ACL 532003. Results may vary.

Related reading: Bad Credit Home Loans → | Can I Get a Home Loan With Bad Credit? →

Verify ASIC licences at asic.gov.au. Free credit reports at equifax.com.au.