Bad Credit Home Loans
Paid or unpaid defaults? Discharged bankrupt?
Bad Credit Home Loans. Home loans for people with bad credit. Having bad credit shouldn’t stop you from getting a home loan and owning your own home or investment property. Due to uncontrollable life events, such as suddenly losing your job, going through a separation or divorce, or experiencing a sudden illness, you may find it difficult to keep up with your financial commitments.
Thankfully, there are a range of specialist lenders and brands in Australia who will accept borrowers with paid and unpaid defaults, discharged bankruptcy claims, mortgage arrears and a high number of credit enquiries on their credit files. The products offered by these lenders are known as non-conforming home loans or bad credit home loans and are very flexible with lending conditions, usually also being offered to self-employed borrowers.
Read through the guide below to find out about bad credit and how it can affect your home loan chances.
What is bad credit?
Bad credit occurs when you get one or more negative listing on your credit file, or you have a low Equifax score. Depending on how many and the type of listing, it could decrease your chances of getting a loan with a typical lender dramatically. Below are some examples of what a bad credit file contains:
- Unpaid bills. One of the main ways that people will get a bad credit history will be because they have unpaid bills. Make sure you keep your payments up to date and on time. Try to pay them back as soon as possible.
- Late payments. While late repayments will affect your credit history, they will not have as much as an effect as unpaid bills.
- Applying too often. Having too many credit enquires on your credit file is also a red flag for any potential lender. Seeing 10-15 enquires in a 12 month period is abnormal and could trigger further investigation from the potential lender.
- Bankruptcy. If you have declared bankrupt then you will have a bad credit rating that will stay on your credit file from five to seven years. Even if you’ve been discharged, your name stays on a Solvency Index. Lenders can access this Index at anytime.
What do lenders assess in terms of credit history?
When a lender conducts a credit history check, they look at a number of factors which are then used to determine whether the applicant poses too much of a risk for them to approve their loan.
- Credit application frequency. One thing all lenders analyse when assessing your credit rating is how often you apply for credit. The higher the number of applications registered in your credit history file and the more frequent they are, the less chance you will have of getting a loan. Of course, they will first ask you if there was a good reason for the frequency of the applications. Also, a lender could reject the application if there are a lot of credit applications on file but the borrower claims to have only a few debts. This is because the lender could simply believe that the applicant is being untruthful about their existing loans.
- Type of credit applied for. The type of loans you applied for will also be important to a lender analysing your credit history. For example, someone who has applied for a large number of credit cards may be declined immediately. It leads the lender to believe that such an applicant is too reliant on credit. On the other hand, someone who has a large number of applications for home loans is understandable. So they could simply be looking to find the cheapest offer.
- Defaults, bankruptcies and other red flags. As with every lender, a non-conforming lender will look at all the red flags in your credit history. However, they will also demand an explanation regarding each entry and you will have to be thorough in the details you provide. If you try to hide something, you won’t improve your credit rating, you will simply make the lender more suspicious and this may lead to your application being declined on the grounds that you were not being transparent enough or fully honest about your circumstances.
Can I get a home loan with paid defaults on my credit file?
You can still get a home loan if you have paid defaults on your credit file. These will appear on your credit history and your success will depend on the lender’s policy.
My partner or spouse has bad credit, does that affect me?
If you decide to apply as a joint application for your home loan, your lender will take into account your partner or spouse’s bad credit history. While your good credit history may offset some of that, the banks will make an assessment based on the complete application and will let you know of the outcome. If you’re declined by a typical lender, then you may need to speak to a bad credit specialist lender. Alternatively if your income is high enough to service the loan on your own, then you can be sole borrower until your partner cleans up their credit rating.
Are there banks that overlook defaults on bad credit?
Yes, there are a number of non-conforming lenders within Australia that will overlook your bad credit history. Aside from this, many of the big banks may overlook a small default if your application is particularly strong.
We deal with Bad Credit Lenders everyday and know each lenders policy back to front. You would like to apply for a bad credit home loan or any other type of finance?Please contact us.