How bad does bad credit have to be before banks won't lend?

Most major banks decline outright with one or more unpaid defaults, recent late payments, or a credit score below ~600. Some second-tier banks will go to ~550 with paid defaults. Below that you typically need a specialist lender.

How much deposit do I need with bad credit?

Most specialist lenders want 15-25% deposit. The lower your score, the more deposit they want. We model what's achievable given your savings and income.

Will my rate be much higher?

Yes — typically 1-3% higher than a prime borrower. The difference shrinks as your score improves and you build repayment history. We plan the refinance to a prime rate after 18-24 months.

Do paid defaults still count against me?

Paid defaults are easier than unpaid ones but still appear on your credit file for 5 years. Specialist lenders will look at how long ago, what type, and whether it was a one-off. Most are workable.

Should I clean my credit file first or apply now?

Sometimes paying out an unpaid default before applying improves your options dramatically. Sometimes it doesn't matter. We'll tell you honestly which moves are worth making before lodging.

Bad Credit | Mortgagefy

Who this guide is for

Australians with paid or unpaid defaults on credit file
Borrowers with late mortgage, credit card or buy-now-pay-later payments
People with credit scores under 600 who have been auto-declined
Borrowers recovering from a financial setback who are now back on track

The real challenge

Major banks use automated credit decisioning. A default — even a small telco or utility one — can trigger an automatic decline regardless of your current income or savings. Most borrowers walk away assuming home ownership is closed off.

But specialist lenders exist precisely because of this. They look at why the default happened, whether it's been resolved, and what your current financial picture looks like — and they fund tens of thousands of loans a year for borrowers the banks rejected.

How Mortgagefy helps

We work with non-bank and specialist lenders that assess bad credit applications case-by-case. We tell you upfront which lender is most likely to approve, what rate to expect, and how to position your application for the best outcome.

Many borrowers refinance to a prime lender within 18-24 months once they've built repayment history on the specialist loan. We plan that exit path so the bad credit loan becomes a stepping stone, not a long-term cost.

How it works — 4 simple steps

Credit review

We pull a soft check of your credit file (no impact on score) and identify exactly what's flagging.

Lender match

Specialist lenders weight different things — we shortlist the 2-3 most likely to approve your situation.

Application prep

We package your income, savings and explanation of past credit issues in the format specialists want.

Refinance plan

From day one we plan the 18-24 month refinance back to a prime lender at a sharper rate.

Frequently asked questions

Get a free bad credit home loan assessment

We tell you the truth about your situation — what's achievable, what rate to expect, and how to plan the refinance back to a prime lender.

Start Your Free Assessment Call 0432 634 648

Get your personalised answer in 2 minutes

Free, no obligation. We'll match you with the right lender for your situation.

Model your scenarios: Use our free home loan calculators to estimate borrowing capacity, repayments, and savings.

Bad Credit Home Loans — When Banks Say No, Specialists Say Yes