How much can I borrow?

You can get approved for a home loan even if you have several defaults on your credit file.

The types of defaults that you have, how old they are, if they’re paid, the total number and the dollar value of the defaults are all taken into account by our lenders.

  • Less than $500 in paid defaults: You can borrow up to 95% of the property value.
  • Less than $1,000 in paid defaults: You can borrow up to 90% of the property value.
  • Any unpaid defaults or larger paid defaults: You can borrow up to 90% of the property value with a specialist lender.

If you meet this criteria then please call our mortgage brokers on 1300 889 743 or fill in our free assessment form and we can help you get approved for a mortgage.


Will I qualify with a bank?

To qualify with one of our banks, you must normally meet the below criteria:

  • No more than $500 in defaults if you’re borrowing up to 95%.
  • No more than $1,000 in defaults if you’re borrowing up to 90%.
  • No more than two defaults in total for the one application.
  • You must have paid the default at least six months prior to the application.
  • If you’re purchasing a property then you must have at least 5% in genuine savings.
  • No other policy exceptions are allowed.
  • You must have a very good reason for your impaired credit history.

Meeting this criteria doesn’t guarantee that a bank will accept your loan.

All applications are assessed on their merits and all banks will credit score your application.

What if I don’t qualify with a bank?

You may qualify with one of our specialist lenders.

We can then refinance your mortgage to a bank once your credit history is clear.


Do specialist lenders accept anyone?

Specialist lenders are more flexible and can consider more defaults than the banks can.

The flip side is you’ll normally pay a higher interest rate than you would with a bank home loan.

However specialist lenders don’t just lend to anyone!

All Australian lenders want to approve low risk borrowers.

They are happy to consider people with approving a bad credit home loan but they are more conservative than the banks in other ways:

  • They accept more defaults than banks.
  • They will listen to your explanation for your bad credit history.
  • They can consider a low doc loan with less income evidence.
  • It’s very difficult to finance vacant land.
  • Few specialist lenders offer construction loans.
  • Few specialist lenders accept properties over 5 acres in size.

Can you qualify with a specialist lender?

Call our mortgage brokers on 1300 889 743 or fill in our free assessment form and we can help you to get approved for a mortgage.


Are low doc loans available?

Yes, you can get a low doc loan with defaults on your credit file.

However, the qualifying criteria can be a little complicated as specialist lenders have very different lending guidelines for low doc loans.

Please call us on 1300 889 743 to discuss this with one of our low doc specialists.


What will the lender know about my defaults?

Defaults will show up on your credit file with the status of either ‘paid’, ‘unpaid’ or ‘settled’.

A settled default is where you’ve made an agreement to pay part of the debt.

The lender will know the date the defaults were lodged, the amount of the defaults, the date they were paid (if you’ve paid them!) and who lodged the defaults.

Defaults remain on your credit file for five years from the date they were lodged.

A default will remain on your credit file even if you pay it, however, this will look slightly more favourable to lenders.

It’s important that you’re aware of what defaults you have and the status of each of them in order to avoid applying with an unsuitable lender and being turned down due to your bad credit history.

This particularly true since credit agencies like Equifax (which acquired the Veda Advantage) started collecting repayment history information from accounts you have with banks, telcos and other financial providers.


What is a credit file default?

A default is a record on your credit file stipulating that you have an overdue account such as a loan, credit card, utility bill or phone contract.

It’s classed as being overdue if the payment is 60 days late or if the lender has been unable to contact you.

It’s your responsibility to make sure that all of your creditors have up to date contact information so that they can contact you if you aren’t making your repayments.

In reality, many lenders don’t manage their customer databases well so some defaults are really the lender’s fault, not yours.

Defaults are lodged on your credit file with Equifax and this information is accessed by lenders when you apply for a loan.

A default will remain on your Equifax credit file for 5 years or 7 years if the reason it was lodged was because the lender couldn’t contact you.

Paying the default doesn’t remove it from your credit file.

However, it does change the status to ‘paid’ which is seen more favourably by lenders.


How do lenders view defaults?

The banks find that borrowers often say to them that they didn’t know they had a default.

Lenders hear a lot of stories and will always assume that you did know about the default.

They simply don’t know who to believe and who not to believe!

We always recommend that you apply with lenders that can accept defaults rather than wasting your time applying with the major banks that will decline your application even if you have only had minor credit issues.

Most mainstream lenders won’t lend to people who have an impaired credit file, irrespective of the reasons.

The banks have looked at the repayment history of customers with a default they’ve approved and found that there’s a significantly increased chance that these customers will miss their repayments.

They can’t tell the good borrowers from the bad so they decline any application from someone who has defaults!


What about late repayments?

In the past, lenders only knew if you had paid or unpaid defaults listed on your credit file.

Today, many lenders have signed up for Comprehensive Credit Reporting (CCR) which means they can now see your repayment history information.

Late payments can be listed on your credit file if they’re overdue by just 2 weeks.

This is compared to getting a default listed after 60 days of no payment.

It’s far easier to drag down your credit score than it was in the past but luckily specialist lenders and select banks can still consider your home loan application.


How to apply for a home loan if you have defaults

To increase your chances of approval, you can take these simple steps:

  • Provide a default explanation letter.
  • Provide evidence to back up your explanation of the cause of your defaults.
  • Save up at least 5% of the purchase price and provide as large a deposit as possible.
  • Pay any unpaid defaults and get the credit provider to mark them as paid on your credit file before you apply for a loan.
  • Apply with a lender that can accept borrowers with defaults.

What you need to do to make sure that you get approved will depend on your situation. This is where we can help!

Please call us on 1300 889 743 or fill in our free assessment form to discuss your situation with one of our mortgage brokers.


Is this different to defaulting on your home loan?

Yes, defaulting on your home loan is where you have a home loan and you’re “in default”.

This means you haven’t met the conditions of the loan contract normally because you haven’t made the payments on time.

View our arrears / missed payments page for more information on refinancing a home loan that’s in arrears.


Can I hide my default from the bank?

No! The lenders will do a credit check and will find out about any defaults that you have.

You should tell the lenders upfront about your defaults otherwise they won’t be pleased when they find out that you withheld this information.

Some banks will decline your loan outright because you didn’t disclose this at the time of applying for the loan.

If you’re applying for a home loan with a default then you need to plan and submit your loan with evidence to back up your story to show the lender that you are a low credit risk.


Does the amount of the default matter?

Different default sizes, amounts and the time they’re paid can have a significant influence on your eligibility for a loan.

Therefore you should be aware of the following terms:

  • Clean credit: No defaults, ever.
  • Near prime: Small paid default less than $500 paid over 1 year ago or excessive enquiries on your credit file. Most lenders can approve a loan for you without any problems.
  • Below average: Paid default less than $1,000 paid over 6 months ago. Some prime lenders and major banks can lend you up to 80% on a case by case basis. Over 80% up to 90% or even 95% may be available in some cases depending on the situation.
  • Bad credit: More than $1,000 in defaults, all paid. You’d likely have to apply with a specialist lender. If you have a very good story backed up with evidence then you may be able to borrow 80% of the property value with one of our banks.
  • Serious credit impairment: More than $5,000 in defaults, some unpaid. You must use a private, specialist or non-conforming lender.

How are different default types viewed?

Settled defaults

A default is listed as ‘settled’ if you’ve come to an arrangement with the lender to pay some of the amount owing in return for the lender not pursuing the remaining debt.

This is seen more favourably than an unpaid default, although it isn’t as glowing as a default that has been paid in full.

Current defaults

A default is listed as ‘current’ if you’ve paid the overdue amount and the account is still open.

For example, if you had a default lodged on your file due to a credit card, pay the amount owing and then continue to use the card, it’s listed as ‘current’.

These defaults should be viewed the same way as a paid default.

However, inexperienced credit managers think that ‘current’ means ‘unpaid’ and will often decline your loan!

Clearout defaults

A default is listed as ‘clearout’ if the lender has tried to contact you several times and has been unsuccessful.

Clearouts will remain on your credit file for 7 years instead of 5 years like other defaults.

In many cases, the reason the lender cannot find you is because you have been overseas or have moved address and haven’t informed the lender.

Regardless of the cause, this is seen as the borrower ignoring their responsibilities.

Lenders are extremely wary when considering a loan for someone with a ‘clearout’ default.

Please discuss your situation with us in detail if you’d like to know if you’re eligible for a loan.


Apply for a mortgage

Our mortgage brokers are experts in lending to people with impaired credit.

Please call us on 1300 889 743 or fill in our free assessment form and one of our mortgage brokers will let you know if you qualify for a home loan.

  • B Lee

    One of my friend lives in NT. She wants to buy a house as she has a consistent income now, and she wants to move out of the place that she is currently renting. Honestly, she was never wise while using credit cards. She shopped unnecessarily, and she did not paid what she owed in time. She had too many credit cards and she either did not have the money to repay them or completely forgot that she had to pay at times. Could you tell me if she falls under bad credit category?

  • Hi B Lee,

    If she didn’t make her repayments on time and usually within 3 months from when its due, it might be listed on her credit file. I recommend her to give a call to Veda Advantage and ask for a copy of her credit file.

    However, there still are lenders who would consider late repayments and defaults and lend up to 95% depending on the size of the default.

  • Dominic

    I had a default of $4,200 lodged in my credit file and it’s now fully paid off. I would like to get a home loan but I’m worried this will be a major issue. Can I still qualify for anything?

  • Hello Dominic,

    Paid defaults of more than $1,000 means that you’ll likely have to apply with a specialist lender. If you have a very good story backed up with evidence then you may be able to borrow 80% of the property value with one of our banks.

  • Dominic

    I will send in my details to your email and hopefully we can work it out with a major lender. Thank you.

  • schardt

    I only had a single default of under $600 and it’s been paid already. Can I get a home loan despite this and also the fact that I may not be able provide full financials?

  • Hey schardt,

    Yes, you can get a low doc loan, however, the qualifying criteria can be a little complicated as the specialist lenders have very different lending guidelines for low doc loans. Please call us on 1300 889 743 to discuss this with one of our low doc specialists.

  • Shin

    Do you have real bad credit specialists? Where can I check out their info?

  • We do have mortgage brokers who specialise in dealing with clients that have a bad credit history. We specialise in dealing with clients that don’t qualify if they go directly to the bank so if you’d like to know about our group of experts, you can check out the pages on the ‘Our Team’ section on our website:
    https://www.homeloanexperts.com.au/our-team/

  • DD

    I’m looking for preapproval for a 80% LVR purchase. I have $75k in savings with ING and the only default I have lodged in my credit file is a $250 default with AGL that I paid off last year.

  • Hi DD,

    Most lenders should be able to help you with this. However, if you’d like some help in getting the most competitive deals and offers then please contact one of our default home loan specialists by calling 1300 889 743.

  • Vishnu Merhan

    I have an unpaid credit default of $9,000 along with a court judgement against it. Both appear on my credit file with deletion dates of mid-2018.

    Question 1: will a default be deleted from my file at the 5-year deletion date even if the outstanding amount remains unpaid?

    Question 2; is there any significance to there being an original and a current listing for the default?

    Thanks, Vishnu

  • Hi Vishnu,

    This is how long things stay on your credit file

    2 years:
    – Repayment history for your current debts (i.e. are the payments on time)

    5 years:
    – Credit enquiries
    – Defaults (paid and unpaid)
    – Writs & summons
    – Judgments
    – Bankruptcy (5 years from when listed or 2 years from when discharged, whichever is later)

    7 years:
    – Defaults listed as a serious credit infringement (where they can’t find you)

    Yes your default should be removed next year even if it is not paid. However in some circumstances we’ve seen credit providers relist the default for another 5 years. We’re not sure if they’re allowed to do that or not but they seem to do it.

    Yes the listing being current or paid is better than it being unpaid. That being said most banks will not approve your loan regardless because of the size of the default and that there is a judgement as well. It will improve the rate that you would get from a specialist lender though.

  • Vishnu Merhan

    They re-list for 5 years? That’s harsh! Win your experience, which credit providers have done that?

  • I’d prefer not to mention which companies as I don’t want to get legal threats mailed to us. However it is rare that companies do this.

  • KrD

    I’m a doctor with a paid default recorded on my credit file. It won’t be out from my file until a few years and I can’t wait until then to get a home loan. I have $30k savings and I own an investment property in NSW with my wife. But my wife also has ATO debt. Will we be able to secure a home loan despite our situation?

  • Hey KrD
    A few lenders may be able to accept this but you may have to leave your wife out of the loan. It’s likely that you won’t be able to qualify for a high LVR home loan so you’ll need to have a sufficient deposit. However, there’s also the option of using equity on your existing investment property so this shouldn’t be a big problem. Please discuss your situation and loan needs in detail with one of our mortgage specialists by calling 1300 889 743.

  • PTO

    I have $8000 worth of settled defaults that I settled 12 months ago and by the time I’m looking to purchase my land will have about $50k-$60k in savings will I still be able to to get a home loan through a specialist lender?

  • Hi PTO,
    Yes it’s likely we can assist you with this. We have a couple of specialist lenders that can accept vacant land and construction. Having the defaults over 12 months old also assists.
    When you’re ready just enquire using this link https://www.homeloanexperts.com.au/free-quote/ and you’ll be put through to a specialist bad credit mortgage broker.

  • PTO

    Is there a time frame that you have to build when getting a vacant land loan? Would just prefer to pay off the land for a year or 2 as much as possible so we can borrow less when it comes to the building part!

  • They say you’re supposed to build within a year or two years but I’ve never seen them enforce this. So your plan should be fine.

  • Jacqui Jones

    I have no defaults but have been pretty slack with paying bills on time (a number of late payments none in the past 30 days). My parents are going to go guarantor for the 20% deposit. I earn $130k a year and plan on consolidating my debt into my loan therefore it would be the only payment I would have to make. What will my chances be with getting a loan with a big bank?

  • Hi Jacqui,
    We’d need to look at your situation in full to be sure as this is complex. We can help with debt consolidation with a guarantor loan and we can help where bills are paid late but the combination of the two is something unusual we’d need to assess.
    The major banks don’t do debt consolidation with guarantor loans so you won’t qualify with them. The good news is that some 2nd tier banks do accept this type of loan and they are cheaper than the banks anyway.
    I hope that helps.