Can I get a home loan with bad credit in Australia?

Securing a home loan in Australia with bad credit is possible but involves overcoming several challenges. Key steps to improve your chances include checking your credit report, paying off outstanding debts, saving for a larger deposit, and considering options like guarantor loans or consulting a mortgage broker. While higher interest rates and stricter terms are common, successful examples demonstrate that strategic planning and leveraging available resources can help achieve homeownership despite a poor credit history.

Navigating the world of home loans can be challenging, especially if you have bad credit. Understanding your options and the steps you can take to secure a home loan despite a poor credit history is crucial for potential homeowners. This article aims to provide a comprehensive guide on obtaining a home loan in Australia with bad credit. We'll explore what bad credit entails, the possibilities and challenges of securing a loan, the types of loans available, and steps to improve your chances. By the end of this guide, you should have a clearer understanding of how to approach home loan applications with bad credit and the best practices to follow to increase your likelihood of approval.

Understanding Bad Credit 

Bad credit is a term used to describe a low credit score, typically resulting from a history of missed payments, defaults, or other negative financial behaviours. Common causes of bad credit include failing to pay bills on time, defaulting on loans, exceeding credit limits, or filing for bankruptcy. A poor credit score indicates to lenders that you may be a high-risk borrower, making it more difficult to secure loans.

Credit scores in Australia range from 0 to 1,000 (or 1,200 with Equifax), with a score below 500 generally considered poor (see table below). Having bad credit can significantly impact your ability to obtain credit cards, personal loans, and home loans, as lenders view your credit history as an indicator of your future financial behaviour. Understanding the factors contributing to bad credit and its implications is the first step in addressing the issue and exploring potential loan options.



833 - 1200

800 - 1000

800 - 1000

Very Good

726 - 832

700 - 799

700 - 799


622 - 725

625 - 699

500 - 699


510 - 621

550 - 624

300 - 499


0 - 509

0 - 549

1 - 299

Can You Get a Home Loan with Bad Credit?

Yes, it is possible to get a home loan with bad credit in Australia, but it comes with challenges. Lenders are typically more cautious when dealing with bad credit borrowers, often requiring additional documentation and imposing stricter terms. However, several factors can work in your favour, such as a stable income, a larger deposit, and a solid repayment history on other debts. Some lenders specialise in providing loans to individuals with bad credit, assessing applications on a case-by-case basis. These lenders may look beyond the credit score, considering your overall financial situation and your efforts to improve your creditworthiness. Examples of successful applications include borrowers who have demonstrated consistent income and responsible financial management despite past credit issues. While the road may be more challenging, securing a home loan with bad credit is achievable with the right approach and preparation.

Types of Home Loans Available for Australians with Bad Credit

Several types of home loans cater to bad credit borrowers in Australia:

  1. Specialist Bad Credit Home Loans: These loans are designed specifically for individuals with poor credit histories. They often come with higher interest rates and fees but provide an opportunity to secure financing.
  2. Low Doc Loans: Low documentation loans are suitable for self-employed individuals or those with irregular income who might not meet the strict criteria of traditional loans. These loans require less financial documentation but may carry higher interest rates.
  3. Guarantor Loans: In a guarantor loan, a family member or friend with good credit agrees to guarantee the loan, reducing the risk for the lender. This can improve your chances of approval and may result in better loan terms.

Each of these options has its pros and cons, and it’s essential to evaluate which type of loan best fits your circumstances and long-term financial goals.

Steps to Improve Your Chances of Getting a Home Loan with Bad Credit

Improving your chances of securing a home loan with bad credit involves several proactive steps:

  1. Check and Understand Your Credit Report: Obtain a copy of your credit report to identify and address any inaccuracies. Understanding your credit history allows you to explain past issues to potential lenders.
  2. Pay Off Outstanding Debts: Reducing your overall debt level can improve your credit score and demonstrate financial responsibility. Focus on paying down high-interest debts first.
  3. Save for a Larger Deposit: A larger deposit reduces the loan amount you need, lowering the lender's risk. It also shows your ability to save and manage money effectively.
  4. Get a Co-signer or Guarantor: A co-signer or guarantor with good credit can significantly enhance your loan application, providing additional security for the lender.
  5. Consult a Mortgage Broker: Mortgage brokers specialising in bad credit loans can provide valuable advice and access to lenders willing to consider your application. They can help you navigate the complexities of the loan market and find suitable options.

By taking these steps, you can strengthen your loan application and demonstrate to lenders that you are a responsible borrower despite your past credit issues.

Legal and Financial Implications

Applying for a home loan with bad credit involves several legal and financial considerations:

  1. Legal Requirements: Ensure you comply with all legal requirements, including providing accurate information on your loan application and understanding the terms and conditions of the loan agreement.
  2. Financial Responsibilities: Be aware of your financial responsibilities, including the potential for higher repayments and the impact on your overall financial health. Missing repayments can further damage your credit score and lead to legal actions.
  3. Seeking Professional Advice: Engage with financial advisors or mortgage brokers specialising in bad credit loans to navigate the complexities of the application process and ensure you make informed decisions.

Understanding these implications helps you prepare for the responsibilities and potential risks associated with obtaining a home loan with bad credit.


While obtaining a home loan with bad credit in Australia is challenging, it is possible with the right approach. By understanding your options, improving your financial situation, and seeking professional advice, you can increase your chances of securing a home loan and achieving your homeownership goals.

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