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Guide · The bank said no

Can I get a home loan with bad credit?

Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 8 min read

Score vs file: the bank reads the file

Your credit score is one number sitting on top of a pile of information: the accounts you hold, whether you've paid them on time, any defaults, and every enquiry. A lender doesn't stop at the number. It reads the pile. I've helped people with a score in the 400s who'd never missed a repayment, they'd just made too many enquiries in one month, and it didn't stop them. A respectable score sitting on top of missed repayments is the one that gets questions.

So "bad credit" isn't one thing. It's a low score with a clean file, or late payments, or a default, or a hardship flag, and each of those gets a different answer.

Why your reports look different

There's more than one credit reporting body in Australia, they can hold different information about you, and each works out its score its own way. Lenders don't all check the same one. So one report can look clean while another shows your hardship, and the one a lender pulls is the one that counts. You're entitled to a free copy from each of them every three months. Grab them all before you apply, not just the one with the friendliest app.

Missed payments, defaults and how long they sit

Repayment history stays on your file for two years, month by month. A default stays for five years from the date it was listed, paid or not, then it drops off for good. Plenty of people carry a default around in their head long after it's left the file, so check before you assume.

Inside those windows, recency and size are what matter. A couple of late card repayments recently will put most mainstream banks off, while a second tier lender may still approve you with a rate loading. A small, paid, non-financial default, think an old phone bill, sits inside the written tolerance of a fair few mainstream lenders, usually somewhere around $500 to $1,000. Unpaid or larger defaults move you into the specialist lane. Before going there, it's worth asking the provider that listed it whether it can be removed, especially if it was small or disputed.

Hardship on your file

A financial hardship arrangement shows on your report for 12 months, along with the type of arrangement, and your repayments during it are reported against the arrangement. Lenders then set their own look-back. Some will consider you three months after it ended, some six, many want 12 months of clean repayments, and at least one won't look inside two years. Asking your bank for help when you needed it is not the end of borrowing. It just shapes which lender goes first.

No credit history at all

Generally not a problem. Australia doesn't make you build credit the way America does. If you've never had a loan or a card, a file gets created when you apply, and with nothing bad on it there's nothing giving the bank a reason to say no. Some automated scoring can rate an empty file a little lower, and your income, savings and spending still have to stack up. But no credit beats bad credit every day of the week.

Credit repair: when it helps and when it is money for nothing

Read the file before you pay anyone. Sometimes it's better than you think and there's already a lender that will support you, impairment and all. Sometimes it's a lot worse and needs fixing first. A credit repair business can chase a removal for a fee, but it can't remove an accurate listing, and you can ask the listing provider yourself for free. Pay for help only once you know exactly what's on there and why it should come off.

Specialist lenders as a stepping stone, and the way back

Specialist lenders exist for files the banks won't touch. They say yes, and they charge for it. Their tolerance for defaults runs much higher, often paid or unpaid defaults up to a few thousand dollars, with older listings treated more kindly. Used properly it's a stepping stone: get in, keep the repayments clean, and around the 12 month mark we look at a better product or a move to a mainstream bank. And if you got knocked back elsewhere first, you can reapply straight away with a lender whose criteria you fit, as long as the first decline is explained.

Enquiries, buy now pay later and the small stuff

There's no magic number of enquiries. The type matters more than the count: home loan enquiries barely register, while a run of car loans, personal loans and payday lenders reads as someone short on cash. Buy now pay later has been regulated credit since June 2025, and most banks treat the limit like a credit card, roughly five times the limit off your borrowing. And the assessor reads your last three months of statements, so regular betting or food delivery every night gets seen and declared. A few clean months before you apply goes a long way.

Paid-off debts that still show

If you've closed something and it still shows as open, the bank counts it against you. A closure statement fixes that. Some accounts, including some buy now pay later and car finance, don't always report their status cleanly, so grab closure letters for those up front. It's one less question at assessment.

Related reading

Why is my borrowing power so low? Every bank said no answer in the library The full guide: Bank or non-bank lender

Straight answers in this guide

What credit score do I actually need for a home loan? I had a default years ago. Does it still count? How many credit enquiries is too many? How soon can I reapply after a decline? Does Afterpay affect my home loan application? Does the bank see my Uber Eats and my Sportsbet spending? Low credit score and a few defaults. Should I see a credit repair specialist first? I've missed a couple of credit card repayments. If I pay them off, can I still get approved? I've never had a loan or credit card. Is having no credit history a problem for a home loan? Why does one credit report look clean and the other one shows my hardship? I had a hardship arrangement a couple of years ago. Will that stop me refinancing? I'm with a specialist lender. Am I trapped, or how do I get over to a big bank? Do I need closure letters for debts I've already paid off?

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