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Can You Get A Home Loan With Bad Credit?

Katie Douglass

Katie Douglass

May 12, 20214 minute read
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If you have a bad credit history and want to purchase a home, you might be wondering whether you can get a home loan. While a poor credit score can affect your ability to be approved for a mortgage, there are a few options you can consider.

On this page:

    Below, we unpack whether you can get a home loan with bad credit and some of the options you might want to consider to help you get the house of your dreams.

    What is a bad credit score?

    Based on the personal and financial information in your credit report, a credit score is a number that represents how reliable you are as a borrower. As each of the credit reporting bureaus in Australia use a different scoring method, what’s considered a ‘bad’ credit score can vary.

    Here’s an overview of each bureau’s scoring range and what they mean:

    Score Range Experian Equifax illion
    Excellent 800 – 1,000 833 – 1,200 800 – 1,000
    Very Good 700 – 799 726 – 832 700 – 799
    Good 625 – 699 622 – 725 500 – 699
    Average 550 – 624 510 – 621 300 – 499
    Below Average 0 – 549 0 – 509 0 – 299

    If you have a bad credit score, it might impact your ability to be approved for a loan or line of credit. It can also mean you are more likely to be charged a higher interest rate. This is because a poor credit rating can make you appear to be a high-risk borrower to lenders.

    Some of the factors that can contribute to a bad credit score include:

    • A poor repayment history;
    • A high number of credit applications;
    • Defaults, serious court infringements, bankruptcy, and debt agreements;
    • A large number of enquiries on your report.

    If I have bad credit, can I still get a home loan?

    If you have bad credit, it doesn’t exactly mean you won’t be approved for a home loan but it can be difficult. There are a few options you can consider to help you purchase a home.

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    Important note:

    Before we take you through your options, it’s important to understand that lenders in Australia are required to follow responsible lending guidelines as set out by the Australian Securities and Investments Commission (ASIC). This means lenders are legally obligated to ensure that they only offer a loan if it is suitable for the borrower and will not cause them financial hardship.

    Find a lender who looks beyond your credit score

    There are some lenders who will look beyond your credit score and take into account other factors before approving you for a home loan. To get a better idea of your financial situation, some lenders look at other factors such as your current income, spending habits, everyday expenses, deposit amount, and assets.

    It’s important to keep in mind that your credit score can influence the amount of interest you are charged. Generally, the lower your score, the higher the interest rate. This means if you are approved for a home loan with bad credit, you might be charged a higher interest rate.

    Non-conforming or specialist home loans

    Generally, traditional banks and lenders are less likely to approve you for a mortgage if you have bad credit. However, there are non-conforming or specialist lenders who offer home loans to those who don’t meet the same criteria as traditional lenders. It’s important to note that these types of loans often come with a higher interest rate and more fees. So, make sure you read the terms and conditions carefully to determine whether it’s suitable for your financial situation.

    What can I do to improve my credit score?

    Before applying for a home loan, it might be worth taking steps to improve your credit score. Below, we’ve put together some ways to help improve your rating:

    Pay on time

    As your repayment history is a part of your credit file, paying existing loans or credit cards on time can help boost your credit score. To help keep on top of your repayments, consider setting up a direct debit system. Additionally, it’s important to inform your lender or credit provider if you think you won’t be able to make a repayment on time.

    Have a low credit limit

    If you’re applying for a credit card, try to avoid requesting a high credit limit or, if you currently hold one, consider lowering the amount. This is because your credit report records the credit limit you have, not how much you have actually spent. Plus, by having a lower amount of credit, it can be easier to keep on top of repayments.

    Don’t apply too many times

    Whether you are approved or not, making too many loan or credit applications in a short period of time can impact your score negatively. This is because a large number of applications can make you appear to be in financial distress and, as a result, a high-risk borrower. Before applying, make sure you meet the eligibility criteria and request a reasonable amount to limit the need for multiple applications.

    Check your credit report for any inaccuracies

    Make sure to regularly check your credit report and keep an eye out for any inaccuracies that could be impacting your score. If you find an error, get in touch with the relevant credit reporting agency and ask them to amend or remove it.


    Copyright © www.jacarandafinance.com.au Jacaranda Finance Pty Ltd ® ABN 53 162 078 195 Australian Credit Licence 456 404, Pawnbroking License Number 4221738. The information on this web-page is general information and does not take into account your objectives, financial situation or needs. Information provided on this website is general in nature and does not constitute financial advice.


    Katie Douglass
    Katie Douglass

    Written by Katie Douglass

    Katie Douglass is the Senior Communications Manager at Jacaranda Finance. In recent years, Katie’s work has appeared in publications such as Marie Claire, InStyle, Oiyo, and THE ICONIC. She has a Bachelor of Creative Industries in Fashion Communication & Journalism from the Queensland University of Technology.

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