Can I Get a Home Loan With Bad Credit in Australia?

Quick Answer: Yes, you can get a home loan with bad credit in Australia — through non-conforming and specialist lenders who accept impaired credit files. But rates are typically 2–4% higher than mainstream home loan rates, adding hundreds of thousands of dollars in interest over a 30-year term. If your credit issues stem from defaults listed in breach of the Privacy Act 1988, removing them first through professional credit repair is almost always the smarter financial decision.

Owning a home feels out of reach when lenders keep saying no. If defaults, court judgements, or a low credit score are blocking your application, you've probably been told to either wait five years or accept a punishing specialist rate. There is a third option — and for many Australians, it's the one nobody told them about.

This guide answers the question directly: yes, you can get a home loan with bad credit. What we'll focus on is whether you should apply now, or whether 30–90 days of credit repair could save you more than $200,000 over the life of the loan.

What Lenders See When You Have Bad Credit

When a lender receives your home loan application, they run a credit check with their preferred bureau — usually Equifax for the major banks. What they see determines everything that follows.

An active default triggers an automatic decline at most mainstream lenders. This isn't a judgment call — it's a policy. No amount of income or deposit overcomes it at the big four banks. Non-conforming and specialist lenders are different: they assess the whole picture, but they price for the risk they're taking on.

The Real Cost of a Bad Credit Home Loan

The rate premium on a non-conforming home loan isn't a minor inconvenience. Over 25–30 years, it compounds into an enormous sum.

These figures assume a 30-year principal and interest loan with the rate difference maintained throughout. Even if you refinance to a mainstream rate after two or three years, the early years of higher repayments still represent a substantial cost.

Real Case Study: Wei, Melbourne — Non-Conforming Quote vs. 58-Day Wait

Wei, 43, a civil engineer from Melbourne, had been working towards buying his first home for six years. He'd saved a 20% deposit. His income was stable. His only obstacle was a $740 default from a private health fund listed three years earlier — the result of a disputed premium increase he'd refused to pay while challenging it with the insurer.

His mortgage broker had found him a non-conforming loan approval at 9.6% p.a. on a $560,000 loan. On the surface it was a win — he could buy. The numbers told a different story: compared to the mainstream rate of 6.4% he would have qualified for on a clean file, the total additional interest over 30 years was approximately $315,000.

Wei contacted ACS before signing. During his free assessment, we identified that the health fund had listed the default while his formal dispute with the Private Health Insurance Ombudsman was still open — a direct breach of the Credit Reporting Code. The listing was unlawful.

We lodged the challenge. The health fund acknowledged the breach within 22 days. The default was removed on day 34.

With the default gone, Wei's Equifax score moved from 481 to 729. His mortgage broker reapplied through a major bank. Approved at 6.29% p.a.

Result: Wei's Equifax score moved from 481 to 729 in 34 days. He waited 58 days from first contacting ACS to unconditional home loan approval. The difference in total interest over 30 years on his $560,000 loan: approximately $302,000. That's what 58 days of patience was worth. He only paid when we succeeded. Subject to individual assessment; results may vary.

When Does It Make Sense to Apply With Bad Credit Now?

Not every situation allows for waiting. Applying to a non-conforming lender now makes sense when:

• The opportunity is genuinely time-sensitive (auction deadline, off-the-plan settlement)
• The credit issue cannot be removed (lawfully listed, not yet expired)
• Your financial position is deteriorating and property purchase provides stability
• You plan to refinance to a mainstream rate within 12–18 months once credit improves

Even in these cases, get a free credit assessment first. It takes 24 hours and might reveal the default is removable — changing the entire calculus.

How to Get a Home Loan With Bad Credit: Step by Step

1. Pull all three credit reports — Equifax, Experian, Illion — before approaching any lender
2. Identify the specific negative entries — defaults, judgements, excessive enquiries
3. Get a professional assessment — find out if any entries can be challenged under the Privacy Act 1988
4. If removal is viable, pursue it first — 30–90 days, mainstream lending opens
5. If not viable, work with a specialist broker — non-conforming products through brokers with access to Pepper, La Trobe, Bluestone, Resimac
6. Build your application file — 2 years of tax returns, 6 months bank statements, proof of deposit, employment documentation
7. Plan your refinance — if you accept a non-conforming rate now, set a 12-month target to refinance once your file improves

Frequently Asked Questions

Can I get a home loan in Australia with defaults on my credit file? Yes — through non-conforming and specialist lenders who specifically cater to impaired credit applicants. Mainstream banks will typically decline automatically if an active default is present. The key question is whether that default was listed lawfully. If not, removing it under the Privacy Act 1988 typically takes 30–90 days and opens mainstream lending at substantially better rates.

What credit score do I need for a home loan in Australia? Most mainstream lenders prefer an Equifax score of 660+ (the Good band). Some will consider 600+ with strong income and a large deposit. Non-conforming and specialist lenders work with scores below 500. The presence of an active default is often a harder barrier than the actual score — many lenders apply automatic decline rules for any active default regardless of the score.

How much deposit do I need for a bad credit home loan in Australia? Non-conforming lenders typically require a minimum 20% deposit (80% LVR or lower) for applicants with impaired credit — higher than the 5–10% some mainstream lenders accept for clean-credit borrowers. A larger deposit reduces the lender's risk and can sometimes partially offset the impact of credit issues on your rate.

Can I use the First Home Owner Grant with bad credit? Yes — the First Home Owner Grant (FHOG) is based on property eligibility and first-home status, not credit history. However, the home loan funding the purchase still depends on lender approval. If credit issues are preventing mainstream loan approval, the grant is less useful until the loan is secured.

How long after fixing my credit can I apply for a home loan? If your credit score improvement follows the removal of a default, you can apply immediately after the removal is confirmed — there's no mandatory waiting period. Many of our clients apply within days of removal confirmation and receive approval within 2–4 weeks. The key is that lenders see a file without the default, not one where it was "recently removed."

What is a non-conforming home loan in Australia? A non-conforming or specialist home loan is a mortgage product offered by lenders who accept applications that don't meet the standard criteria of major banks — specifically for borrowers with impaired credit, irregular income, or unusual property types. The trade-off for this flexibility is a higher interest rate. Major non-conforming lenders in Australia include Pepper Money, La Trobe Financial, Bluestone, and Resimac.

Ready to Find Out What's Actually Possible?

Before accepting a non-conforming rate or giving up on homeownership, find out whether the entry blocking your application can be removed. A free assessment takes minutes and could save you hundreds of thousands.

Australian Credit Solutions is ASIC-licensed (ACL 532003), lawyer-led by Principal Solicitor Elisa Rothschild, and has helped over 5,000 Australians access the home loan they deserved since 2014. No Win No Fee. 98% success rate on accepted cases.

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Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit repair services are subject to individual assessment. Results may vary. This article provides general information only and does not constitute legal or financial advice.

Related reading: Bad Credit Home Loans → | Default Removal Services → | Credit Repair for Home Loan Approval →