Bad Credit Home Loans in Australia, September 2026
A home loan with a credit blemish is usually possible. The questions are which tier of lender, at what price, and whether waiting would cost less than borrowing now.
Can I get a home loan with bad credit in Australia?
Often, yes. Australian home lending is tiered: major banks and most lenders want a clean file, near-prime lenders accept minor or aged issues, and specialist lenders assess recent or heavier impairment case by case. What decides the outcome is the age, size and status of each listing, your deposit or equity, and whether repayments since have been on time.
There is no approval guarantee at any tier. Every lender has to assess that the loan is not unsuitable for you under the National Consumer Credit Protection Act, and a lender that skips that step is the wrong lender.
What lenders mean by "bad credit"
Lenders do not see a single score; they read the events on your credit report and how old they are. The Office of the Australian Information Commissioner sets how long each event can stay on file:
| Listing | Stays on your credit report |
|---|---|
| Default | 5 years |
| Court judgment | 5 years |
| Serious credit infringement | 7 years |
| Bankruptcy | The later of 5 years from the day you became bankrupt, or 2 years from the day you were no longer bankrupt |
| Credit enquiry | 5 years |
| Repayment history (on time or late, month by month) | 2 years |
| Financial hardship information | 1 year |
Source: OAIC, what stays on a credit report, checked 2 September 2026.
Three details matter more than the label:
- Paid or unpaid. A default that has been paid, with the paid status recorded, is a different file from one still outstanding. Most near-prime lenders want defaults paid before settlement.
- Age. A listing from four years ago with clean conduct since reads very differently from one from last quarter.
- Pattern. Two years of repayment history is on your file. A run of on-time months after a bad patch is evidence in your favour; a scatter of late marks across several accounts is the opposite.
You can get your own report free from each credit reporting body every three months, and correcting a genuine error is free. Do that before applying anywhere, because an unexpected listing discovered by the lender is the worst way to find it. The glossary entry on credit scores explains how the reporting bodies score a file.
The three lender tiers, and which one you fit
- Prime. Banks, mutuals and prime non-banks. Clean file expected: no unpaid defaults, no recent late marks, no bankruptcy on file. Standard pricing. The home loan rates table is this tier.
- Near-prime. Lenders that accept minor or aged listings: small paid defaults, a telco or utility default, a period of late repayments that has since cleaned up. Pricing sits above prime and lenders mortgage insurance is often replaced by a lender risk fee.
- Specialist. Case-by-case assessment for recent or larger defaults, discharged bankruptcy, Part IX debt agreements, or unpaid listings with an explanation. Pricing is higher again, LVR is capped lower, and the file is read by a person rather than a scorecard.
Several panel lenders operate across all three tiers. Pepper Money, Liberty and Resimac each publish prime, near-prime and specialist products, and La Trobe Financial assesses complex files by hand. The tier you are offered decides the rate, so ask which tier an application would land in before comparing rates at all.
What a bad credit home loan costs
Three costs move together as you go down the tiers:
- Rate. Near-prime and specialist products price above prime. The premium narrows as the file ages and widens for recent or unpaid listings. Ratesniffers does not promote a bad credit rate, because no product row encodes credit history; the lender's quote for your tier is the only real figure.
- Risk fee or LMI. Above 80% LVR, and at some specialist lenders at any LVR, a one-off lender risk fee replaces or adds to lenders mortgage insurance. It can be capitalised into the loan and is then charged interest.
- LVR cap. Specialist lending often stops at 80% or 85% of the property value, so a bigger deposit or more equity is not just cheaper, it is what makes the loan available. See low deposit home loans for how LVR tiers work on the prime side.
The usual plan is a bridge, not a destination: settle on the tier you qualify for, keep 12 to 24 months of clean repayment history, then refinance to prime pricing once the listings age out. The refinancing with bad credit page covers that second step, and refinance home loan rates shows the prime tier you are working toward.
What improves the odds
Not a checklist for approval; each lender weighs these its own way.
- Time since the last listing, and a clean repayment history since. Every month of on-time payments across all accounts adds to the two-year record on your file.
- Defaults paid, with the paid status confirmed on the report before you apply.
- A larger deposit or more equity. Under 80% LVR opens more lenders and removes the risk fee at most of them.
- Stable income that is easy to verify. A self-employed borrower with impaired credit is asking a lender to absorb two uncertainties; see low doc and self employed home loans for the income side.
- A written explanation for each listing: what happened, when it was resolved, what changed. Specialist lenders read these.
- Fewer applications. Every credit enquiry stays on file for five years, and a cluster of declines is itself a red flag. One well-placed application beats five hopeful ones.
- A family guarantee can bring the assessed LVR down, though it does not remove the listings. The guarantor loan guide explains how it works.
When waiting beats borrowing now
If a default is close to falling off the five-year mark, or the last late repayment is a few months old, the cost difference between applying now and applying in six to twelve months can be an entire pricing tier. Waiting is not an option for everyone, but it is worth pricing. Compare the specialist quote you can get today against prime pricing on the home loan rates table and ask whether the gap over the period you would hold the loan is bigger than the cost of waiting.
Bad credit home loan questions, answered
How long after a default can I get a home loan?
Some near-prime lenders consider paid defaults straight away, most prefer at least a year or two of clean conduct, and the widest choice returns once the default drops off your report after five years. The size of the default, whether it is paid and your conduct since matter more than the raw date.
Can I get a home loan after bankruptcy?
Usually only after discharge, and then through specialist lenders while the bankruptcy is still on your report. The listing stays for the later of five years from the start or two years from discharge. Prime lenders generally wait until it has gone.
Will a lender see a default that has been paid?
Yes. A paid default stays on your report for the full five years, marked as paid. Lenders treat a paid default far more favourably than an unpaid one, which is why paying and confirming the paid status before applying matters.
Does checking my own credit report hurt my score?
No. Accessing your own report is not a credit enquiry. Applications for credit are, and each stays on file for five years.
Do bad credit home loans have higher interest rates?
Yes, near-prime and specialist products price above prime lending, and a risk fee may apply. Ratesniffers does not publish a bad credit rate because no product row can be matched to a credit history; the lender's quote for your tier is the figure to compare against the prime table.
Can a guarantor help with bad credit?
A family guarantee can lower the LVR the lender assesses, which helps with the deposit side, but it does not remove the credit listings. Lenders assess the borrower's file and the security separately.
WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is based on a loan of $150,000 over a term of 25 years.
The information provided on this site is general in nature and does not take into account your objectives, financial situation or needs. Before acting on any information, consider whether it is appropriate for you and read the relevant Credit Guide and lender disclosures.
Next: compare current home loan rates to see the prime tier you are working toward, read how refinancing with bad credit works when it is time to move off a specialist loan, or talk through where your file sits on a free call at book a call. General information only, not credit advice for your circumstances.
Page last reviewed 2 September 2026.