Having a bad credit history or past arrears doesn’t necessarily mean you can’t get a home loan. Lenders assess a range of factors when considering applications, and some are more flexible than others when it comes to credit issues. It’s important to understand how your credit report affects your options and what steps you can take to improve your chances. Whether it’s defaults, late payments, or previous hardship arrangements, there are still pathways available—especially if you’ve shown recent signs of financial stability.
The issue commonly faced by clients are those who are in a position where there is less than 20% equity in their home. If you’re in this position, you will find that it’s not only the lender criteria that needs to be satisfied, but also the criteria of the LMI provider.
Until you get financial advise...
Do
- Do speak to someone qualified, not google
- Do try and maintain your repayments. Having arrears limits lender options if you were to restructure
- Do set up a budget
- Do speak to lenders. Most lenders will try to assist you (but don't enter financial hardship without getting independent financial advise)
- Do try and build a short-term & long term plan
- Do understand why the debt occurred and how you ended up in this position. You cannot fix anything until you fix the problem
Don't
- Don't take on more debt to cover your existing debt
- Don't enter financial hardship or bankruptcy without getting financial advise
- Don't sell your assets. You still need a house to live in & car to go to work
- Don't apply for more credit. This could damage your credit score
- Don't speak beyond your means, including using credit cards and buy now pay later facilities
- Don't rely on pay-day loans
- Don't change jobs without a clear plan
Problems vs. Solutions
Approach a lender who won't check you credit file OR consider approaching a credit repair agency
Think about restructuring your loan into a single repayment that is manageable
This is tricky as most lenders will want to see 6 months of consistent repayments for any debts you have. You may need to think about a long term plan where you can meet your obligations for 6 months prior to restructuring
You can go to low-deposit lenders however you will find that typically they won't be cost effective with the higher rates and risk fee or LMI payable. Instead perform a valuation with a few lenders and seeing if there are any lenders who can take a higher valuation would be a great place to start
Different lenders assess income differently. Use a mortgage broker who has access to multiple different lenders. Consider using Centrelink income, bonus income or boarding income if you have this available.
Copyright © 2025 2K Finance – Residential Mortgage Specialist | 2K Finance Credit Representative Number 549574 to Australian Credit Licence 377294. Information is general and non-specific to any individual. Always seek advice from a financial advisor.