A default, a run of missed payments or a past bankruptcy can make the big banks say no. Some specialist lenders look at the story behind your credit file instead of just the score. These loans usually cost more, and they’re not right for everyone. I’ll walk you through the options and the trade-offs, so you can decide with clear eyes.
Many mainstream lenders use automated credit scoring. If something on your credit report doesn’t fit their rules, the application can be declined before a person ever looks at why it happened. Job loss, illness, a relationship ending or a business that didn’t work out can all leave a mark on your credit file.
Specialist lenders, sometimes called non-bank or non-conforming lenders, assess each application case by case. These are sometimes called “bad credit” home loans. They still have to lend responsibly, so they’ll want to see that you can afford the repayments now, not just that the past problem is behind you.
What happened, whether it’s been resolved, and how you’ve managed your money since. A clear, honest explanation matters.
Specialist loans usually come with a higher interest rate and extra fees. We’ll look at the full cost before anything goes ahead.
Every lender has its own rules. What’s possible depends on how serious the issue was, how long ago it happened, and your situation today.
A default can be listed when a consumer credit payment of $150 or more is at least 60 days overdue. Late payments show up in your repayment history. Some specialist lenders will consider paid defaults, and sometimes unpaid ones, depending on the amount, the type of debt and how long ago it happened.
Once you’ve been discharged from bankruptcy, or have completed a debt agreement (Part IX), some specialist lenders may consider a home loan application. They’ll usually want to see how you’ve rebuilt since, such as steady income, savings and clean repayment history.
A court judgment or an outstanding tax debt can make mainstream lenders cautious. Some specialist lenders may consider them, particularly where the debt has been paid or there’s a clear plan to clear it. If you run your own business, see our business finance page as well.
If you’ve fallen behind on your home loan or other debts, refinancing with a specialist lender is sometimes an option. Rolling short-term debts into a home loan can lower monthly repayments, but you may pay more interest overall because the debt is spread over a longer term. It’s also worth speaking to your current lender, as they may be able to help with hardship arrangements.
A specialist loan can help some people buy or keep a home. It also comes with costs and risks worth understanding first.
Rates are usually higher than mainstream home loans. Even a small difference adds up over the life of a loan.
Some lenders charge risk fees or higher setup fees, which may be added to the loan amount.
Lenders often lend a smaller share of the property’s value, so you may need more deposit or equity.
If you can’t keep up repayments, the lender can take steps to sell the property. A buffer for rate rises matters.
Some people later refinance to a mainstream lender once their credit history improves. That depends on your circumstances and lender rules at the time, so plan as if you’ll stay on this loan.
Each formal application can be recorded on your credit file for five years. That’s why we check lender rules before applying, not after.
I’m a finance and mortgage broker and a registered nurse who still works casual shifts. Nursing taught me that people’s circumstances rarely fit a neat box, and that a calm, honest conversation goes further than a lecture. I’ll listen to what happened, check what’s actually on your credit file, and give you a straight answer about what may be possible and what it’s likely to cost.
Straight answers, including the “it depends” parts.
It may be possible once you’ve been discharged, usually through a specialist lender. Bankruptcy stays on your credit report for five years from the day you became bankrupt, or two years from the day you were discharged, whichever is later. Lenders will look at how long it’s been, what caused it, and how you’ve managed your money since. Expect a higher rate and a bigger deposit than a standard home loan.
Five years. Repayment history information stays for two years, and credit enquiries for five years. Paying a default doesn’t remove it, but your report can be updated to show it’s been paid, which some lenders view more favourably.
Yes. You can get your credit report free once every three months from each credit reporting body, such as Equifax and Experian. Each one may hold different information, so it’s worth checking more than one. If something is wrong, you can ask for it to be corrected for free.
Be careful. Some charge large fees for things you can do yourself for free, like requesting your report or asking for an error to be fixed. Correct information can’t legally be removed just because you pay someone. The National Debt Helpline can help you with this for free.
It depends on the lender, the type of credit issue and how recent it is. Specialist lenders often ask for a larger deposit than mainstream lenders, and some may require lenders mortgage insurance or a risk fee. I’ll check the actual numbers for your situation before you start looking at properties.
Not necessarily, but there’s no guarantee. As credit issues get older and you build a record of on-time repayments, some people are able to refinance to a lower-cost loan. It depends on your circumstances, the property’s value and lender rules at the time.
Tell me what happened and what you’re hoping to do. I’ll give you an honest view of what may be possible, what it’s likely to cost, and whether now is the right time to apply.