Can I get a home loan with a default on my credit file?

Usually yes. A default does not make you uniscoreable — it moves the file from the prime banks to the specialist and near-prime tier, which assesses on the merits of the whole story rather than the score alone. Lenders writing credit-impaired residential loans include Pepper Money, Liberty, Bendigo & Adelaide Bank (which assesses on merit and doesn't credit-score), and La Trobe Financial (which operates a one-event credit policy). What matters is the size of the default, whether it's paid, how recent it is, and the reason behind it. A small, paid telco default from two years ago is very different from a $20,000 unpaid mortgage arrears from last month. We pull the credit report first to see exactly what the lenders will see.

What counts as bad credit for a home loan?

Several different things, with very different weight. A default is an overdue debt of $150 or more, reported once it is 60+ days overdue and the creditor has tried to contact you — it stays on the file for five years. A court judgement (a legal order to pay) also lists for five years. Repayment history information (RHI) — whether you paid each month's obligation on time — shows the last 24 months and is the most sensitive item for a new mortgage. Financial hardship arrangements now list for 12 months but do not by themselves lower your score. Credit inquiries list for five years and too many in a short period drags the score down. Bankruptcy and personal insolvency agreements (Part IX / Part X) are the heaviest — five years from the date of bankruptcy on the credit file, and a permanent record on the National Personal Insolvency Index.

Which lenders accept bad credit or low credit scores?

The specialist and near-prime tier. Pepper Money and Liberty are the two largest specialist lenders and price by the severity of the credit profile — a clean near-prime file prices close to prime, a heavily impaired one starts higher. Bendigo & Adelaide Bank (via Connective Select) does not credit-score at all — it assesses every file on its merits and only auto-declines defaults over a set threshold, so a strong story with a sub-optimal score can still get a yes. La Trobe Financial runs a one-event credit policy that treats a single life-event impairment (a discharged bankruptcy, a one-off default) on its own facts. Resimac and RedZed also write impaired files. The right lender depends on what the impairment is, whether it's paid, and how recent it is.

Can defaults be removed from my credit file?

Sometimes — and more often than people expect. A specialist credit-repair firm reviews whether a listing was made lawfully under Part IIIA of the Privacy Act 1988 and the Privacy (Credit Reporting) Code: for example, whether the required notices were sent, or whether a hardship arrangement was applied correctly. Where there are valid legal grounds and a genuine story (a life event such as illness, divorce or job loss), a meaningful proportion of defaults can be removed, typically over four to eight weeks, and most reputable firms work on a no-win, no-fee basis. We refer clients to a licensed credit-repair specialist where it's worth it — we don't do the repair ourselves — and the economics usually stack up: removing a default that's forcing a 9-10% specialist rate down to a ~6% prime rate recovers the cost quickly. Credit repair is a separate service from arranging your loan.

What can't be fixed on a credit file?

Plenty, and being honest about it matters. Missed payments in the last six months are the big one — even if a default is removed, recent late payments on the repayment-history section will keep you out of prime lending for roughly one to two years until they age off. Bankruptcy and Part IX/X agreements can't be erased: bankruptcy lists for five years from the date you became bankrupt (or three years from discharge, whichever is later) on the credit file and stays permanently on the National Personal Insolvency Index. Some default types and certain creditors are also very difficult to move. Where an impairment can't be removed, the plan is to place the file with a specialist lender now, keep a clean record, and refinance to prime once the listing ages off.

Will I pay a much higher interest rate with bad credit?

You'll pay a premium, but it is graded to the severity, not a flat penalty. A near-prime file — a small paid default, a slightly low score from inquiries — prices only modestly above prime. A heavily impaired file (unpaid defaults, recent arrears, a discharged bankruptcy) prices higher; on the heaviest specialist files the rate can start with a 'one'. The point of using a specialist lender is to get the deal done now and stop the problem compounding. The plan is rarely to stay there: maintain a clean record, repair what's removable, and refinance to a prime lender once the file supports it — often within one to two years.

How long after a default or bankruptcy can I get a home loan?

Sooner than most people assume, on a specialist lender. A paid default doesn't impose a fixed waiting period with the specialist tier — it's assessed on the facts. For bankruptcy, several specialist lenders will consider an application once you are discharged (typically three years from when you became bankrupt), and a few will look at it within a year of discharge with a strong story and deposit. The return to prime lending is the slower step — usually a couple of years of clean conduct after discharge or after the listing ages off. The right sequence is specialist-now, prime-later, planned deliberately rather than waiting in the hope the file clears itself.

Bad credit · defaults · the path back to prime

Home loans with bad credit — it changes where the file goes, not whether it can happen.

Q: What is the difference between an Equifax and an illion credit score?

Australia has more than one credit bureau, and they score the same person differently because they hold different data and use different models. Equifax and illion are the two most used by mortgage lenders. The same borrower can have an Equifax score that is materially lower or higher than their illion score, and illion can also miss corporate or administration entities that Equifax surfaces. Because lenders lean on different bureaus, the practical step is to pull the Equifax report early — it is the harder of the two and tells you what the cautious lenders will see. We assess the actual report, not just the headline number; a low score driven only by recent credit inquiries is a different problem to one driven by a default or court judgement.

Q: Is it worth paying out my defaults before applying?

Often yes — paying out an overdue debt changes a default from 'unpaid' to 'paid', which materially widens the lender options and improves pricing, even though the listing itself remains for five years. In a real case, paying out around $42,000 of mortgage arrears in full before lodging was the move that took a heavily impaired file from a 9%-plus specialist quote to a sub-6% approval with a lender that took the story. Whether to pay out, and in what order, depends on the file — we map it before you lodge so the report is in its best shape when the lender pulls it.

A default, a low score or a discharged bankruptcy doesn't make you unlendable. It moves the file from the prime banks to a tier of specialist and near-prime lenders that assess on the merits of the whole story, not the score alone — and prices to the severity. This page explains how the credit file actually works, which lenders write impaired files, what credit repair can and can't remove under the Privacy Act, and the deliberate plan back to a prime rate.

The short version

Bad credit reshapes the panel: Pepper, Liberty, Bendigo & Adelaide (which doesn't credit-score at all) and La Trobe (one-event policy) assess impaired files on merit. The rate is graded to the severity, not a flat penalty.

And it's often temporary. A meaningful share of defaults can be removed on legal grounds under the Privacy Act, typically in 4–8 weeks and usually no-win-no-fee. The plan is normally specialist now, prime later — get the deal done, clean the file, refinance.

What "bad credit" actually means

Not all impairments weigh the same. Before anything else, we pull the credit report so we're reading the same file the lender will — and so the heavy items are separated from the cosmetic ones.

Default — an overdue debt of $150 or more, listed once 60+ days overdue after the creditor has tried to contact you. Stays on file five years. A paid default is treated very differently to an unpaid one.
Court judgement — a legal order to pay. Lists for five years.
Repayment history information (RHI) — whether you met each month's obligation, shown for the last 24 months. The single most sensitive item for a new mortgage.
Financial hardship arrangements — now listed for 12 months, but they do not by themselves lower your score (a deliberate protection — taking a hardship arrangement beats simply missing payments).
Credit inquiries — each application lists for five years; too many in a short window drags the score down on their own.
Bankruptcy / Part IX / Part X — the heaviest. Five years from the date of bankruptcy on the credit file, and a permanent record on the National Personal Insolvency Index.

Equifax and illion don't agree

Australia has more than one credit bureau and they score the same person differently. Lenders lean on different ones, and illion can miss corporate or administration entities that Equifax surfaces. We pull the Equifax report early because it's the harder read — it tells us what the cautious lenders will see, so there are no surprises at assessment.

The lenders who assess on merit, not just the score

When the prime banks decline on the score, the file moves to the specialist and near-prime tier. Positions below are indicative and confirmed on the lender's own policy before any application.

Lender	Approach to credit	Best for
Pepper Money	Specialist; prices by severity of the profile	The broad workhorse for impaired files — graded near-prime to specialist; clear pathway back to prime
Liberty	Specialist; merit-based	Defaults, discharged bankruptcy, complex impairment with a story
Bendigo & Adelaide (Connective Select)	Does not credit-score — assesses every file on merit; only auto-declines defaults over a set threshold	A strong story with a sub-optimal score; bank pricing without a score wall
La Trobe Financial	One-event credit policy — single life-event impairment on its own facts	A discharged bankruptcy or a one-off default with a clear cause; no clawback

What credit repair can remove — and the plan back to prime

A listing isn't always permanent. Where it was made unlawfully, or a hardship arrangement was mishandled, it can be challenged — and removing it can move the file two pricing tiers.

A licensed credit-repair specialist reviews whether each listing complied with Part IIIA of the Privacy Act 1988 and the Privacy (Credit Reporting) Code — for example, whether the required warning notice was sent, or whether a hardship arrangement was applied correctly. Where there are valid legal grounds and a genuine life-event story (illness, divorce, redundancy), a meaningful proportion of defaults can be removed, typically over four to eight weeks, and most reputable firms work no-win, no-fee. We refer to a licensed specialist where it's worth it — we don't do the repair ourselves — and the economics usually stack up: moving a default that's forcing a 9–10% specialist rate down to a ~6% prime rate recovers the cost quickly. The sequence is deliberate: place the file with a specialist now, repair what's removable, keep a clean record, and refinance to prime once the file supports it — often within one to two years.

Be honest about what can't be fixed

Missed payments in the last six months are the wall — even if a default is removed, recent late payments on the repayment-history section keep you out of prime for roughly one to two years until they age off. Bankruptcy can't be erased. Where an impairment can't be moved, we plan around it rather than pretend it isn't there.

Get the file in its best shape before the lender pulls it

The order of operations matters. A few moves before lodgement can change the lender options and the rate.

The biggest lever is often the simplest: paying out an overdue debt changes a default from "unpaid" to "paid", which widens the panel and improves pricing even though the listing itself remains for five years. In one file, clearing roughly $42,000 of mortgage arrears in full before lodging was the move that took a heavily impaired application from a 9%-plus specialist quote to a sub-6% approval with a lender that took the story — paid arrears plus a clear explanation of the cause. We map the report, the payouts and the story before you lodge, so the file is at its strongest the moment a lender pulls the bureau.

Let's read the actual file first.

Most "bad credit" is more workable than it feels. We pull the report, separate the heavy items from the cosmetic ones, map the specialist lenders your file fits, and set the plan back to prime — including whether credit repair is worth a referral.

Get a straight read on your file → Borrowing capacity calculator →

What this page is, and what it isn't.

This is general information about credit, not personal credit advice. Credit repair is a separate, third-party service provided by licensed specialists — we facilitate the borrowing side of the file and refer to a repair specialist where appropriate; we don't perform or advise on credit repair ourselves. Lender policies and pricing are indicative, vary by file, and are confirmed before any application. Credit-reporting timeframes are general and current at the date above. Your full situation and requirements are assessed before any loan is recommended or accepted.

Bad credit home loan questions

Can I get a home loan with a default?

Usually yes — a default moves the file to the specialist tier (Pepper, Liberty, Bendigo & Adelaide, La Trobe), which assesses on the whole story rather than the score. Size, whether it's paid, how recent, and the reason all matter. A small paid telco default is a world away from recent unpaid mortgage arrears.

Equifax vs illion — why are my scores different?

They're separate bureaus with different data and models, so the same person scores differently; illion can also miss entities Equifax shows. Lenders lean on different ones — we pull Equifax early because it's the harder read and tells us what cautious lenders will see.

What actually counts as bad credit?

Defaults (≥$150, listed 5 years), court judgements (5 years), repayment history (last 24 months — the most sensitive), financial hardship arrangements (12 months, but they don't lower your score), inquiries (5 years), and bankruptcy/Part IX–X (the heaviest). They carry very different weight.

Which lenders accept low credit scores?

The specialist/near-prime tier: Pepper and Liberty price by severity; Bendigo & Adelaide (Connective Select) doesn't credit-score at all and assesses on merit; La Trobe runs a one-event policy. Resimac and RedZed also write impaired files.

Can defaults be removed?

Sometimes, and more often than expected — a credit-repair specialist challenges listings made unlawfully under the Privacy Act or where hardship was mishandled, with a genuine life-event story, typically over 4–8 weeks and usually no-win-no-fee. We refer where it's worth it; removing a default that's forcing a 9–10% rate down to ~6% pays for itself fast.

What can't be fixed?

Missed payments in the last 6 months (1–2 years to recover even if a default is removed) and bankruptcy (5 years from the date of bankruptcy, permanent on the insolvency index). Where it can't be moved, we plan the specialist-now, prime-later route around it.

Will the rate be much higher?

A premium graded to the severity — a small paid default prices close to prime; a heavily impaired file higher (the heaviest can start with a "one"). The point is to get the deal done now and refinance to prime once the file supports it, often within 1–2 years.

Should I pay out my defaults before applying?

Often yes — paying an overdue debt turns a default from "unpaid" to "paid", widening the panel and improving pricing. In one file, clearing ~$42k of arrears before lodging took it from a 9%+ quote to a sub-6% approval. We map the order before you lodge.

Primary sources

OAIC — Credit reporting and Part IIIA, Privacy Act 1988 — the law governing what's listed and for how long.
ASIC MoneySmart — Credit scores and credit reports — independent consumer guidance.
AFSA — Bankruptcy and credit and the National Personal Insolvency Index.
AFCA — the external dispute scheme for credit-listing disputes.
ASIC — Responsible lending (RG 209) and the National Consumer Credit Protection Act 2009.

Richard Esteb

Licensed mortgage broker · Credit Rep #574071

Esteb & Co — authorised under Connective (ACL #389328)

Impaired-credit files are some of the most rewarding to get right, because the gap between a thoughtful placement and a flat decline is so wide. The work is reading the actual report, separating what's heavy from what's cosmetic, placing the file with the lender that assesses on merit, and planning the route back to a prime rate — not treating a default as the end of the conversation.