How to Get a Mortgage with a Bad Credit Score in 2026

Can You Get a Mortgage with Bad Credit in Australia?

The answer is often yes, but the choice of lenders may be smaller.

A poor credit score does not tell a lender everything. The lender will usually look at the events that caused the score, how long ago they happened, and how you have handled money since then.
One small paid default from several years ago may be treated differently from several recent unpaid defaults.

Your income and deposit also matter. A borrower with stable employment, manageable expenses and a strong deposit may have options even when their credit file is not clean.

People searching for “can you get a mortgage with bad credit often expect a simple score cut-off. Australian lenders do not all use the same scoring model, so there is no single number that decides every application.

What Does Bad Credit Mean to a Home Loan Lender?

Bad credit usually refers to information on your credit report that suggests you have struggled to meet financial commitments.

This may include missed repayments, defaults, court judgments, frequent credit applications, a debt agreement or bankruptcy.

A lender may also be concerned by recent bank statements that show overdrawn accounts, failed direct debits, unpaid bills or regular use of short-term credit.

The cause of the problem matters.

A missed repayment caused by a bank error is not the same as a long period of unpaid debt. A default linked to illness, redundancy or identity theft may also require a different assessment.

The lender will usually want to know what happened, whether the problem has been resolved and why it is unlikely to happen again.

How Do Lenders Assess a Bad Credit Home Loan Application?

Lenders assess whether you can afford the loan and whether the risk fits their lending policy.

They will review your income, expenses, debts, deposit, credit reports and recent banking conduct.

They may also test whether you could continue making repayments if interest rates increased.

Under Australian responsible lending rules, lenders must make reasonable enquiries about your financial position and check whether the proposed loan is unsuitable. ASIC explains the responsible lending obligations that apply to credit providers.

Your credit report

The lender may review your repayment history, credit enquiries, defaults, judgments and other reported information.

They will usually consider the amount involved, when the issue happened and whether it has been paid.

A repeated pattern may cause greater concern than a single event.

Your income

Regular income can support an application, but the lender will also consider how secure that income is.

Permanent employees may have a simpler application process. Casual workers, contractors and self-employed applicants may need to provide extra evidence.

This may include payslips, bank statements, tax returns, business activity statements or financial accounts.

Your existing debts

Credit cards, car loans, personal loans, buy now pay later accounts and student loan repayments can reduce borrowing capacity.

An unused credit card may still affect the assessment because the lender may calculate repayments using the card limit.

Reducing or closing an unnecessary limit may help, but it is worth checking with a broker before making changes.

Your deposit

A larger deposit reduces the amount being borrowed compared with the value of the property.

This can make the application easier for a lender to consider, although it will not fix an income shortfall or serious repayment problems.

The source of the deposit must also be clear. A lender may ask whether the money came from savings, a gift, an inheritance or another loan.

Your recent account conduct

Recent bank statements can show whether your finances are now stable.

Failed payments, overdraft use and repeated late fees may weaken the application.

A clean period before applying can help, especially when the older credit issue has already been resolved.

What Bad Credit Home Loan Options Are Available?

The right option depends on the type of credit problem, your deposit, your income, and how soon you want to buy.

A borrower asking “can I get a home loan with bad credit” may have access to one or several of the following loan types.

Standard Bank Home Loans

A Standard Bank loan may still be possible when the issue is old, small or already resolved.

Banks usually offer lower rates and fewer risk fees than specialist lenders.

They may also provide a wider choice of features, such as offset accounts, redraw and fixed or variable rates.

The main drawback is that bank lending policies can be strict. Some applications are declined through automated scoring before the borrower’s circumstances are reviewed in detail.

A standard loan may be worth considering if your recent repayment history is clean, your deposit is strong, and you can clearly explain the credit issue.

Submitting applications to several banks without checking their policies can cause problems. Each formal application may leave a credit enquiry.

Specialist Lender Home Loans

Specialist lenders consider applications that may fall outside standard bank policy.

They may accept some borrowers with defaults, missed repayments, unusual income or a past debt agreement.

Their assessment may focus on the reason for the problem and what has changed since then.

The main benefit is flexibility. A specialist lender may consider an application that a bank has already declined.

The cost is often higher.

Interest rates, application fees and risk fees may exceed those attached to a standard loan. A larger deposit may also be required.

Some borrowers use a specialist loan and later try to refinance with a bank after building a stronger repayment record.

That outcome cannot be assumed. Refinancing will depend on future income, property value, lender policy and credit conduct.

Non-Conforming Home Loans

A non-conforming home loan is designed for borrowers who do not meet ordinary lending rules.

The term is often used for loans provided by specialist lenders.

These loans may suit borrowers with adverse credit, irregular income, limited financial records or unusual property types.

The lender may take a closer look at the full application instead of relying mainly on automated scoring.

Rates and fees are commonly higher, and the product may offer fewer features.

Before accepting a non-conforming loan, compare the total cost rather than focusing on whether the application can be approved.

Check the interest rate, comparison rate, establishment fees, ongoing fees and refinancing costs.

Guarantor Home Loans

A guarantor loan may help when a borrower has limited savings.

A parent or family member may offer part of their property as security for part of the loan.

This can reduce the deposit hurdle and may help the borrower avoid lenders mortgage insurance in some cases.

A guarantor does not replace the need for sufficient income. The borrower must still show that the repayments are affordable.

The risk to the guarantor is serious.

If the borrower cannot repay the loan, the guarantor may become responsible for the guaranteed amount. Their property may be at risk if the debt remains unpaid.

Moneysmart recommends that guarantors understand the commitment as carefully as if they were taking out the loan themselves.

Both parties should obtain independent legal and financial advice.

Low-Deposit Home Loans

Some lenders accept deposits below 20 per cent of the property value.

Approval can be harder when a small deposit is combined with poor credit.

The lender is being asked to accept greater risk from both the low deposit and the credit history.

Lenders’ mortgage insurance may apply when the deposit is below 20 percent. This insurance protects the lender, not the borrower.

A low-deposit loan may help someone buy sooner, but it can increase the loan amount and upfront cost.

Saving a larger deposit may provide access to a wider choice of lenders.

Government Deposit Scheme Loans

Eligible buyers may be able to purchase through an Australian Government home guarantee scheme.

Under current Housing Australia rules, eligible first home buyers may be able to apply with a deposit starting at 5 percent. Eligible single parents and guardians may be able to apply with a deposit starting at 2 percent.

Housing Australia publishes the current eligibility, property and participating lender requirements.

The scheme does not guarantee loan approval.

The borrower must still meet the lender’s affordability and credit rules.

Someone with recent unpaid defaults may satisfy the scheme rules but still be declined by the lender.

Joint Home Loans

Applying with another person may increase the income available for the loan assessment.

The lender will also examine both applicants’ debts, expenses and credit reports.

A strong credit history from one applicant does not cancel the other person’s adverse information.

Both borrowers are generally responsible for the full loan balance.

A joint application may help when both people have stable income, manageable debts and a clear agreement about repayments and ownership.

Legal advice may be useful when the applicants are contributing different deposit amounts or are not married.

Low-Documentation (Low-Doc) Home Loans

Some self-employed borrowers may qualify using alternative income records.

The lender may accept business bank statements, business activity statements, an accountant’s letter or recent tax records.

A low-documentation loan does not allow a borrower to avoid proving affordability.

The lender still needs reliable evidence of income.

These products may have higher rates, lower borrowing limits or larger deposit requirements.

An accountant can help make sure your business records are current and consistent before the application is submitted.

Which Option Is Best for a Home Loan With Bad Credit?

The cheapest suitable loan is usually preferable to the easiest approval.

A specialist loan may solve an immediate problem, but a higher rate can add a large amount to the total cost.

A guarantor loan may reduce the deposit requirement, but it places another person’s finances at risk.

A low-deposit loan may allow you to buy sooner, but it can increase repayments and leave little room for unexpected costs.

The best choice depends on your credit issue, deposit, income and how long you expect to keep the loan.

A broker can compare these factors before a formal application is made.

Should You Use a Mortgage Broker?

A mortgage broker can help identify lenders whose policies fit your circumstances.

This can be useful because lenders do not assess every default, missed payment or credit enquiry in the same way.

A broker who regularly handles poor credit home loans may know which lenders are willing to consider your type of credit issue.

They can also explain likely deposit requirements, rates, fees and supporting documents.

Before choosing a broker, ask how often they work with adverse credit cases.

You should also ask which lenders are on their panel, how they are paid and whether you will be charged a fee.

A broker can recommend a lender, but they cannot guarantee approval.

Moneysmart explains how mortgage brokers are paid and what borrowers should check before accepting a recommendation.

How to Improve Your Chances of Pre-Approval

A better application starts before you contact a lender.

The aim is to understand what appears on your credit file, reduce avoidable risk and present accurate financial information.

Check all of your credit reports

Request a report from each Australian credit reporting body (Equifax and Experian).

Information can differ between reports, so checking one may not give you the full picture.

The Office of the Australian Information Commissioner states that you can request a free consumer credit report once every three months. You may also qualify for a free report after being refused credit or after information has been corrected.

The OAIC explains how to access your credit reports.

Look for accounts you do not recognise, incorrect balances, duplicate entries and credit enquiries you did not authorise.

Also check whether paid debts have been updated correctly.

Correct errors before applying

Incorrect credit information can affect the lender’s assessment.

You can request a correction from the credit provider or credit reporting body without paying a fee.

A default cannot be removed simply because it has been paid or because it is affecting a mortgage application.

There must be a valid reason for correction or removal.

The OAIC states that a consumer payment default may be reported when the payment is at least 60 days overdue, the amount is at least $150, and the required notices have been issued.

The OAIC explains the rules that apply to repayment history and defaults.

A free credit report assessment may help if you are unsure whether an entry was reported correctly.

Avoid unnecessary credit applications

A formal application can create an enquiry on your credit report.

Several enquiries within a short period may suggest that you are seeking credit from several sources.

Do not apply to several banks to see which one accepts you.

Research the lender first or ask a broker to review the available options.

Checking your own credit report does not create the same type of enquiry as a loan application.

Pay every account on time

Recent repayment conducts matters.

Use reminders or direct debits for loans, credit cards, utilities, phone bills and other regular commitments.

Make sure there is enough money available when payments are due.

A clean repayment record needs time to develop. A few on-time payments may not offset a recent pattern of missed accounts.

Reduce debts and credit limits

Lower debts can improve borrowing capacity.

Credit card limits can also affect how much a lender is willing to offer, even when the balance is low.

Paying down a card may help, but reducing the limit can have a separate effect on the lender’s calculations.

Ask a broker before closing a long-held account or making several changes at once.

Resolve unpaid defaults

An unpaid default can be harder for a lender to accept than a paid one.

Paying the debt does not automatically remove the listing. It should update the entry to show that the amount has been paid.

Keep settlement letters and proof of payment.

If you dispute the debt, obtain advice before making a payment or admitting that the amount is owed.

Save a larger deposit

A larger deposit can lower the loan amount and reduce the lender’s risk.

It also shows that you can save consistently.

Keep the funds in an account where their source can be verified.

Using a personal loan for the deposit may reduce your borrowing capacity because it creates another repayment.

Keep your finances steady

Major changes before an application can create extra questions.

This includes changing jobs, taking out a car loan, opening a credit card or making large purchases.

A job change is not always a problem, but probation periods and irregular income may affect the assessment.

Self-employed borrowers may need a longer record of stable income.

Prepare a clear explanation

A lender may ask why the credit issue occurred.

Keep the explanation factual and brief.

Explain what happened, when it happened, how it was resolved, and what has changed since then.

Support the explanation with documents where possible.

These may include medical records, redundancy letters, police reports, insurance documents or proof of a separation.

Apply for an amount you can manage

A smaller loan may improve serviceability and reduce the deposit required.

Consider the full cost of ownership, including council rates, insurance, repairs, strata fees and maintenance.

Test your budget using a higher interest rate.

Moneysmart provides a mortgage calculator that can help compare repayments at different rates.

How Long Should You Wait Before Applying?

There is no set waiting period.

You may be ready sooner when the issue was small, paid and several years old.

Waiting may be sensible when missed payments are recent, debts remain unpaid, or your deposit is small.

You may also benefit from waiting if your bank statements still show failed direct debits or regular use of short-term credit.

A rejected application may add another enquiry to your credit report.

It is often better to prepare one strong application than submit several weak ones.

How Much Deposit Do You Need?

The required deposit depends on the lender and the credit issue.
Some borrowers may qualify with a deposit below 10 percent.

Others may need 20 percent or above.

Recent defaults, unpaid debts or unusual income may lead to a larger deposit requirement.

You will also need funds for purchase costs.

These may include stamp duty, conveyancing, inspections, lender fees and moving costs.

Keep an emergency reserve after settlement. Using every dollar for the deposit can leave you exposed when repairs or bills arise.

Do Bad Credit Home Loans Cost More?

They often do.

A lender may charge a higher interest rate when it considers the application riskier.

Specialist loans may also include application fees, risk fees or higher valuation costs.

The comparison rate can help show the effect of some fees, but it may not include every cost.

Ask for a full list of charges before accepting the loan.

A lower rate may still be expensive if the loan has large fees or limited refinancing options.

Can a Credit Repair Provider Help?

A credit repair provider can review your report and assess whether an entry may be incorrect or reported without the required process.

This can be useful when you find a default you do not recognise, incorrect repayment history, an unauthorised enquiry or information linked to identity fraud.

A provider cannot lawfully remove accurate information simply because it makes it harder to get a loan.

No credit repair service can guarantee mortgage approval.

Credit Wipe can assess adverse entries and explain whether further investigation may be warranted.

Depending on the issue, this may involve default removal, credit enquiry removal, court judgment removal or repayment history removal.

When Should You Speak to an Accountant?

An accountant may help when you are self-employed or receive income from several sources.

They can prepare tax returns, business activity statements and financial accounts that support the figures used in the application.

They may also explain one-off business expenses or changes in income.

The records supplied to the lender must be accurate.

Trying to improve borrowing capacity by overstating income or hiding liabilities can cause the application to fail.

When Should You Speak to a Financial Counsellor?

A financial counsellor may be the right person to contact when existing debt is already difficult to manage.

Financial counsellors provide free and confidential support.

They can help with budgets, creditor negotiations, hardship requests and repayment plans.

The National Debt Helpline can connect you with a financial counsellor in your state or territory.

Here is a list of free financial counselling services.

Taking out a mortgage may not be safe while you are struggling with current bills.

It may be better to stabilise your finances before adding a large secured loan.

What Can Cause Pre-Approval to Be Withdrawn?

Pre-approval is conditional.
A lender can change or withdraw it if your circumstances change or the property does not meet its requirements.

Taking out new credit, changing jobs, or increasing your expenses may affect the final decision.

A low property valuation can also reduce the amount the lender is willing to provide.

Do not treat pre-approval as a guarantee.

Before signing a contract, obtain legal advice about finance conditions and the risks of an unconditional offer.

Common Mistakes to Avoid

• Do not hide debts, defaults or recent applications from your broker or lender. They are likely to appear during the assessment.
• Avoid making several formal applications at once.
• Do not assume that paying a default removes it from your credit report.
• Do not accept a high-cost loan without checking the total amount payable.
• Do not use a guarantor unless everyone understands the legal and financial risk.
• Do not take out new credit after receiving pre-approval.

These mistakes can reduce your options or cause an approval to be withdrawn.

How Credit Wipe Can Help

The first step is finding out what a lender will see.

Credit Wipe can review your credit report, identify adverse entries, and assess whether any information may require correction or further investigation.

Each case depends on the facts and the way the information was reported.

You can request a free credit report assessment before approaching a lender or mortgage broker.

You can also read about Credit Wipe’s credit repair services.