How to Get Approved for a Home Loan With Bad Credit in Australia

Quick Answer: To get approved for a home loan with bad credit in Australia, first check whether any defaults on your file were listed unlawfully under the Privacy Act 1988 — professional removal in 30–90 days often unlocks mainstream approval. If removal isn't viable or urgent, work with a specialist mortgage broker, save at least 20% deposit, demonstrate 6+ months of stable income, and consider non-conforming lenders who assess the full picture rather than applying automatic decline rules.

Getting a home loan with bad credit in Australia requires a clear plan — not blind optimism, and not giving up. The approval rate for impaired credit applications depends on which steps you take, in which order, and whether you've addressed the underlying credit issue before you apply.

This guide gives you the practical playbook: what to do first, what lenders actually look at, and what genuinely improves your chances.

Step 1: Know Exactly What's on Your File Before Anyone Else Does

Applying for a home loan without knowing what's on your credit file is like sitting a difficult exam without knowing what's in it. Every lender you approach will check your Equifax, Experian, or Illion file — and their assessment will be based on what they see there, not on what you think is there.

Request your free report from all three bureaus — Equifax, Experian, Illion — before approaching any lender. Read every section: defaults, enquiries, court judgements, repayment history. Anything unfamiliar warrants investigation.

Step 2: Check Whether Any Defaults Can Be Removed

This is the step that changes everything for many people.

Under the Privacy Act 1988, credit providers must follow strict procedural rules when listing a default. The most common breach: failing to issue a written Section 21D pre-listing notice at least 30 days before the listing. The second most common: listing the default while a genuine dispute was still open, in breach of the Credit Reporting Code.

When either breach can be established, the default can be removed through a formal challenge — typically in 30–90 days. Once removed, the score improves immediately and mainstream lenders become accessible.

A free credit assessment from ACS determines within 24 hours whether removal grounds exist for your specific situation. There's no cost and no obligation to proceed.

Step 3: Build the Strongest Possible Application

Whether you pursue credit repair first or apply to a specialist lender now, these factors strengthen any home loan application with bad credit:

Step 4: Work With the Right Broker

Not all mortgage brokers work with non-conforming lenders. Many brokers only access the major banks and tier-two lenders — and if your credit file has a default, they'll simply tell you they can't help.

A specialist broker with non-conforming lending experience has access to Pepper Money, La Trobe Financial, Bluestone, Resimac, and other lenders who specifically assess impaired credit applications. They know which lenders look most favourably at your specific credit profile — one lender might accept a paid default older than 3 years; another might focus heavily on the income picture.

Find ASIC-licensed mortgage brokers at asic.gov.au. Ask specifically: "Do you work with non-conforming lenders? Which ones?" A broker who can't answer this question doesn't have the right network for your situation.

Real Case Study: Fiona, Canberra — Four Steps, One Approval

Fiona, 39, a public servant from Canberra, had wanted to buy her first home for three years. A $810 default from a short-term lender (taken during a period of post-divorce financial stress) was sitting on her Equifax file. She'd been told by two lenders and one broker that she'd need to wait two more years for it to expire.

Her ACS assessment found that the lender had never issued a Section 21D pre-listing notice. They'd listed the default without the mandatory 30-day written warning. The Privacy Act 1988 was unambiguous: the listing was procedurally unlawful.

The default was challenged and removed in 43 days. Fiona's Equifax score moved from 467 to 701.

She then followed the steps in this guide: 22% deposit already saved, six years of government employment, and a clean CCR repayment history for 14 months. She applied through a major bank via a specialist broker.

Result: Fiona's Equifax score moved from 467 to 701 in 43 days. She was approved for a $445,000 home loan at 6.34% p.a. The non-conforming lender rate she'd been quoted before ACS engagement was 9.8% p.a. Over 30 years, the interest saving is approximately $234,000. She waited 43 days. She only paid when we succeeded. Subject to individual assessment; results may vary.

If Credit Repair Isn't Possible Right Now: Applying to Non-Conforming Lenders

If your defaults were lawfully listed and the 5-year expiry is still years away, non-conforming lending is your path to home ownership now. Here's what to maximise your chances:

1. Save the largest deposit possible — 20% minimum; 25–30% significantly improves your rate and approval odds
2. Demonstrate at least 12 months clean repayment history — no missed payments since the default
3. Keep all current debts serviced — any new missed payment while applying is fatal to the application
4. Prepare a written explanation — factual, brief, explaining the circumstances around the credit event
5. Use a specialist non-conforming broker — they know which lenders match your profile
6. Plan your refinance — set a 12–18 month target to refinance to mainstream once your file improves

Frequently Asked Questions

Can I get a home loan approved with a default in Australia? Yes — through non-conforming and specialist lenders. However, mainstream banks will typically apply automatic decline rules if any active default is present. If the default was listed in breach of the Privacy Act 1988, professional removal in 30–90 days can unlock mainstream lending at significantly better rates.

How long do I need to wait after a default before I can get a home loan? If the default cannot be removed, most non-conforming lenders want to see at least 12 months of clean repayment history after the default was listed. Some mainstream lenders will consider applications 12–18 months after a paid default if the overall file is otherwise strong. Professional removal eliminates the waiting period entirely — you can apply immediately after removal.

What deposit do I need for a home loan with bad credit in Australia? Non-conforming lenders typically require a minimum 20% deposit for impaired credit applicants, compared to 5–10% for mainstream borrowers with clean files. A larger deposit reduces the lender's risk and often leads to a lower rate even within the non-conforming tier.

Will a paid default help me get a home loan? Marginally — paying a default changes its status from "unpaid" to "paid," which some lenders view more favourably in manual assessments. However, the default listing itself remains for 5 years regardless. A paid default is better than an unpaid one but still triggers automatic decline at most major banks. Removal is the only way to fully clear the impact.

What is a non-conforming home loan? A non-conforming or specialist home loan is a mortgage product offered by lenders who accept applications that fall outside mainstream bank criteria — specifically for borrowers with credit impairment, irregular income, or unusual property types. Major non-conforming lenders in Australia include Pepper Money, La Trobe Financial, Bluestone, and Resimac. Rates are higher than mainstream products to reflect the additional risk.

How much more interest do I pay on a non-conforming home loan? Typically 2–4% more than mainstream rates. On a $500,000 loan over 30 years, a 3% rate premium equates to approximately $279,000 in additional interest. This is why professional credit repair — even if it takes 90 days — almost always produces a better long-term financial outcome than accepting the non-conforming rate.

Ready to Find Your Path to Approval?

Whether it's through credit repair or the right non-conforming application strategy, there is a path to home loan approval. ACS can help you identify which path is right for your specific situation.

Australian Credit Solutions is ASIC-licensed (ACL 532003), lawyer-led by Principal Solicitor Elisa Rothschild, and has helped over 5,000 Australians into the home loans 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 →