Refinance With Bad Credit Australia: What's Actually Possible (2026)

Quick Answer: Yes, you can refinance with bad credit in Australia — but your options and the rates you'll be offered depend heavily on what's on your credit file and why. Non-conforming lenders will refinance with defaults and court judgements on file, typically at rates 2–4% above standard. A better strategy, where the timeline allows, is to remove inaccurate or unlawfully listed defaults first under the Privacy Act 1988 — which can take 30–90 days — then refinance at mainstream rates. The interest saving over a loan term is typically tens of thousands of dollars.

You're locked into a high-rate loan and want out. Or your fixed rate is expiring and you can see the revert rate coming. Or you've built equity and want to access it. Whatever your reason, the question is the same: can you refinance with defaults or bad credit on your file?

The answer is yes — but the strategy matters enormously. Refinancing at the wrong rate defeats the purpose. And rushing to the first lender who'll have you can cost you far more than staying put.

This guide covers your real options, what rates to expect, and the one step that most Australians miss before applying.

Why Bad Credit Makes Refinancing Harder — and More Expensive

When you refinance, a new lender assesses you from scratch. They pull your credit file, check your repayment history, assess your income and expenses, and decide whether you're a lending risk.

Defaults, court judgements, and multiple credit enquiries all signal risk. Lenders price that risk with higher rates, lower LVR limits, and stricter income requirements.

The cost of that risk-pricing compounds over time:

Nearly $300,000 in extra interest over 25 years. That's the true cost of refinancing with an unchallenged bad credit file.

Option 1 — Remove the Defaults First (If Timeline Allows)

This is the highest-leverage move available to most Australians with bad credit who want to refinance.

Under the Privacy Act 1988 and the Credit Reporting Code, every default on your file must have been listed in compliance with specific procedural rules. If those rules weren't followed — and they frequently aren't — the listing is unlawful and must be removed.

Common breach grounds:

1. The creditor failed to issue a valid Section 21D pre-listing notice (30-day notice rule)
2. The default amount is incorrect
3. The debt was under genuine dispute when listed
4. The listing has exceeded its 5-year retention period

Telco defaults (Telstra, Optus, Vodafone) and utility defaults (AGL, Origin, EnergyAustralia) are particularly prone to procedural breaches because of high volume processing. A single successful removal can move your credit score 100–200 points — enough to shift from non-conforming to mainstream lending eligibility.

Timeline: most removals take 30–90 days. If you're not in an immediate emergency, the wait almost always pays off.

Get a free assessment from Australian Credit Solutions →

Option 2 — Non-Conforming Refinance (Apply Now With Defaults)

If you need to refinance urgently — fixed rate expiring, financial pressure, or a specific deadline — non-conforming lenders are the path.

These are specialist lenders who assess applications based on equity position, income stability, and loan serviceability rather than a clean credit score. They operate legally and legitimately in Australia, regulated by ASIC.

How to access non-conforming refinance:

1. Engage a specialist mortgage broker — not a direct bank. Non-conforming lenders don't advertise standard rates publicly. Brokers have access to the full panel and can match your profile to the right lender.
2. Know your LVR — non-conforming lenders typically lend up to 80% LVR (some to 85% with LMI). Know your current property value and remaining loan balance before approaching anyone.
3. Prepare documentation — last 2 years of tax returns, 3–6 months of bank statements, current loan statements, rates notice, and payslips or business financials.
4. Understand the rate premium — expect 2–4% above the standard variable rate. This is the cost of the risk. Know whether the new rate is genuinely better than what you have now.
5. Avoid multiple applications — every application creates a hard enquiry on your file. Multiple rejections compound the problem. Work through a broker to place one clean application.

The Refinance Decision Matrix

Real Case Study: Gordon, Sunshine Coast — Saved $211,000

Gordon, 48, owned his home outright to 62% LVR after paying for 11 years. His fixed rate was expiring and reverting to 9.2% — his lender's standard variable for his risk category. He had two defaults on his Equifax file: one from a $490 Telstra account and one from a $780 AGL bill, both from 2022.

He contacted Australian Credit Solutions 9 weeks before his fixed rate expired.

We reviewed both listings. The Telstra default had been listed while a billing dispute was active — a direct breach of the Credit Reporting Code. The AGL listing had been issued with an invalid Section 21D notice — the notice period was 28 days, not the required 30.

Both were disputed immediately. The Telstra default was removed in 31 days. The AGL default took 48 days. By day 52, both were gone and Gordon's score had moved from 512 to 718.

With 7 days to spare before his rate expired, he refinanced with a mainstream lender at 6.18%. His non-conforming option had been quoted at 9.4%.

On $420,000 remaining over 19 years: the rate difference saved Gordon approximately $211,000 in total interest.

He only paid when we succeeded.

Get a free assessment from Australian Credit Solutions →

Steps to Refinance With Bad Credit: The Right Order

1. Get all three credit reports — Equifax, Experian, Illion — before approaching any lender
2. Get a free ACS assessment — identify any removable defaults or judgements
3. If removal viable: pursue removal first, then refinance at mainstream rates
4. If urgent and not viable: engage a specialist mortgage broker (not a direct lender)
5. Get a single, pre-qualified application placed through the broker
6. Once approved, consider a credit repair plan in parallel — some non-conforming lenders will refinance you again at lower rates once your file clears

What Lenders Check When You Refinance

Even non-conforming lenders need to see:

Equity position — the most important factor. Higher equity (lower LVR) offsets credit risk substantially. An applicant at 55% LVR with two defaults will access better rates than one at 85% LVR with one default.

Income stability — 2 years of consistent employment or self-employment income. PAYG employees need payslips. Self-employed need tax returns and an accountant letter.

Current loan conduct — how have you managed your existing mortgage? If you've paid every repayment on time for the last 24 months despite other credit problems, that's a strong signal to lenders.

Genuine savings pattern — 3–6 months of bank statements showing consistent income and manageable outgoings. Unexplained large transfers or consistent overdraft use are red flags.

The reason for defaults — some lenders assess circumstances. A medical event, job loss, or relationship breakdown that caused a temporary default is viewed differently to a pattern of avoidance.

Frequently Asked Questions

Can I refinance if I have a default on my credit file in Australia? Yes — non-conforming lenders will refinance borrowers with defaults on their credit file. Rates are typically 2–4% above standard variable. A better outcome is available if the default can first be removed under the Privacy Act 1988, which opens mainstream lender access. A free assessment determines whether removal is viable before you commit to either path.

How long after a default can I refinance at a normal rate? If the default is accurate and cannot be removed, most mainstream lenders require it to be at least 2–3 years old and for your repayment history since then to be clean. Some lenders have more flexible policies. A specialist mortgage broker can identify which lenders will consider your specific profile. If removal is viable, you can access mainstream rates within 30–90 days regardless of the default's age.

Does refinancing hurt my credit score? A refinance application creates a hard enquiry on your credit file, which stays for 5 years and can reduce your score temporarily. Multiple applications in quick succession compound the damage. Work through a broker who can place one application rather than shopping directly with multiple lenders.

Can I refinance to access equity if I have bad credit? Yes, but LVR limits are stricter with non-conforming lenders — typically 80% LVR or less. If your equity position is strong enough, cash-out refinancing is available even with bad credit. The rate premium still applies. If defaults are removable, doing so first can save substantial interest on the larger loan amount.

What documents do I need to refinance with bad credit? You'll need: 2 years of tax returns (self-employed) or 3 months of payslips (PAYG), 3–6 months of bank statements, your current loan statements showing the outstanding balance, a recent rates notice showing property details, and identification. The lender will also pull your credit file directly.

Is it worth refinancing to a non-conforming loan if the rate is much higher? It depends on your alternative. If your current rate is higher than the non-conforming option, refinancing saves money immediately. If your current rate is lower, the maths may not work. Calculate the comparison rate (not just the headline rate), factor in break costs if you're leaving a fixed rate, and project the total cost over your remaining loan term. A broker can model this for you.

Get Started

Whether you need to move now or have time to pursue the better path first, we'll tell you honestly which option gives you the best financial outcome.

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Related Reading:

• Bad credit home loan Australia
• Credit repair for home loan approval
• Default removal services Australia

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.