Key Takeaways
- Specialist lenders can approve borrowers with defaults, judgments, and discharged bankruptcy
- Larger deposits (20-30%) significantly improve approval chances
- Rates are higher but can be refinanced once credit improves
- Paid defaults are viewed more favourably than unpaid defaults
- Explanation of circumstances helps - life events are understood
- Credit repair strategies can help before applying
A poor credit history doesn't automatically mean you can't get a home loan. While mainstream banks may decline your application, specialist lenders specifically cater to borrowers with credit impairments. The key is finding the right lender for your situation.
At Mortgage & Finance Advisory, we help Australians with credit issues find pathways to home ownership. We assess your specific situation and match you with lenders most likely to approve your application.
What Credit Issues Can Be Overcome?
Paid Defaults
Defaults that have been paid are viewed more favourably. Many lenders accept paid defaults, especially if they're older and you can explain the circumstances. Some mainstream lenders accept small paid defaults over 2 years old.
Unpaid Defaults
More challenging but still possible with specialist lenders. Expect higher deposits and rates. Paying off defaults before applying improves your position.
Judgments
Court judgments for unpaid debts are more serious but specialist lenders can still consider applications, particularly if the judgment is paid and older.
Discharged Bankruptcy
Once discharged (typically 3 years), some lenders will consider applications. Most require 2+ years post-discharge and evidence of credit rehabilitation.
Current Part IX Debt Agreement
Very limited options while active. Some private lenders may consider with very large deposits (40%+). Better to wait until completed.
Credit File Tip: Before applying, get a free copy of your credit file from Equifax, Experian, and illion. Check for errors - incorrect defaults can be disputed and removed. Know exactly what's on your file before we start.
How to Improve Your Chances
- Save a larger deposit: 30%+ opens more doors and better rates
- Pay off existing defaults: Paid defaults are better than unpaid
- Maintain clean recent history: 12+ months with no new issues helps significantly
- Prepare your explanation: Life circumstances like illness, divorce, or job loss are understood
- Demonstrate serviceability: Strong income relative to the loan improves approval chances
Client Success
A Geelong buyer with two paid defaults (totaling $8,000) from 3 years ago was declined by their bank. We found a specialist lender who approved a $480,000 loan with 25% deposit at a rate 1.2% above standard. After 2 years of on-time payments, they refinanced to a mainstream lender at standard rates.
Frequently Asked Questions
Yes, specialist lenders consider applicants with credit issues including defaults, judgments, and even discharged bankruptcy. Requirements include larger deposits (typically 20%+) and higher interest rates, but home ownership is achievable.
Defaults remain on your credit file for 5 years from the date listed (not the date paid). Paid defaults show as 'paid' but still appear. After 5 years, they are automatically removed.
Specialist lenders typically require 20-30% deposit for credit-impaired borrowers. Some may accept 15% for minor issues. Larger deposits improve approval chances and can reduce interest rates.
Yes, most clients on credit-impaired rates aim to refinance after 2-3 years of clean payment history. By then, defaults may have aged or dropped off, and you've demonstrated reliability.
Have Credit Issues? Let's Talk Options
We specialise in finding solutions for borrowers with impaired credit.
