Can You Get a Home Loan With a Default on Your Credit File?

Quick Answer: Yes — it is possible to get a home loan with a default on your credit file in Australia, but it depends on the type of default, its age, and which lender you approach. Major banks will generally decline. Specialist and non-conforming lenders (Pepper, Bluestone, Liberty) may approve with conditions. The better path — where the default was listed incorrectly — is to remove it first and access prime rates. Australian Credit Solutions (ACL 532003) disputes defaults recorded in breach of the Privacy Act 1988 — timing depends on how quickly the creditor responds — and removal can save tens of thousands in interest over the loan term. Subject to individual assessment; outcomes are never guaranteed.

📊 Try it: Use our free mortgage repayment calculator to estimate repayments and see what a higher bad-credit rate really costs over the loan.

Having a default on your credit file doesn't automatically mean you can't buy a home. But it does significantly narrow your options, raise your interest rate, and reduce your borrowing capacity. Understanding exactly what it means — and what you can do about it — is the difference between waiting years and moving forward now.

What Lenders See When You Have a Default

When you apply for a home loan, the lender pulls your credit file from one or more of Australia's two bureaus — Equifax and Experian (illion is now part of Experian). A default listing is one of the most weighted adverse items a lender sees.

Related reading: a BOQ default.

Lenders look at: the default amount, whether it's paid or unpaid, when it was listed, who the creditor was, and what else is on the file.

A $280 telco default from three years ago on an otherwise clean file is viewed very differently from a $4,500 bank default listed six months ago alongside two others.

See also: ME Bank defaults.

Which Lenders Will Consider a Home Loan Application With a Default?

Specialist lenders typically require a 20% deposit (80% LVR), charge rates 1.5–3.5% above standard, and may apply additional conditions such as a satisfactory explanation letter.

The Real Cost of Buying With a Default vs Removing It First

Based on a $600,000 loan. Rates are indicative.

Waiting for the removal of a default that unlocks prime lending rates saves, in this example, nearly $400,000 over the loan term, even though the timing depends on how quickly the creditor responds. The maths almost always favour addressing the file first.

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Frequently Asked Questions

Can major banks approve a home loan with any defaults? Very rarely. Major banks use automated credit scoring that typically declines any application with an active default. Individual exceptions exist but are uncommon and generally require significant compensating factors.

Does the type of default matter for home loan applications? Yes. Telco and utility defaults are viewed differently from bank or financial institution defaults. A single small telco default carries less weight than a bank default. Multiple defaults regardless of type typically result in automatic declines across all lender tiers.

How long after removing a default can I apply for a home loan? Many clients apply immediately after removal. There's no mandatory waiting period. The credit file updates once the listing is removed; timing depends on when each credit reporting body updates your file. Most brokers recommend waiting one full update cycle to ensure the file reflects the change before lodging an application.

Is it better to apply with a specialist lender now or wait to fix my credit? This depends on your personal circumstances — property urgency, current rates, and whether the default can be removed. For most people, fixing the file first and accessing prime rates produces the better financial outcome. A specialist lender approval is sometimes the right choice when urgency is high. Discuss both paths with your broker and your credit repair specialist.

Can ACS guarantee my home loan will be approved after removing the default? No. ACS removes credit listings. Home loan approval depends on many additional factors — income, expenses, deposit, property, lender policy. What ACS removes is the specific credit file obstacle that was causing the decline. Subject to individual assessment.

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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.