Can i get a loan if I have a default?

Blue Key Finance has been in business since 2004, and we remember once you had a mark on your credit file there was nothing you could do about it other than to put your plans on hold for five or more years.

Now, we have a few specialist lenders on our panel who can offer home loans to you even if you have a default or two. They begin with slightly higher interest rates yet with a good repayment record you can move on to a standard home loan with a lower interest rate 18 months later.

These lenders offer loans to those with paid and even an unpaid default and even to discharged bankrupts, but before you apply be sure to consider why you ended up with bad credit, if there are possible credit repair options and how to keep a clean credit history. We would love to recommend you a trusted and reputable credit repair agency by visiting . They will charge a small fee, only if they can guarantee the likelihood of removing your bad credit. This can take up to six 6 weeks which will ultimately put you in a better position for a better home loan. On the flip side, read on to see our top tips for getting approved for a home loan with bad credit.

9 tips to apply for a home loan with a default and get approved

When applying for a home loan with a default, there are a number of things you should consider doing before applying for any home loan.

1. Get a copy of your credit file

Before you even apply for a home loan, you’ll want to ensure that you’re familiar with your credit history. All of your prospective home loan lenders will have a close look at your history before granting you a home loan, so you want to be able to discuss the negative marks on your credit file with confidence. You can get one free copy of your credit file each year. This gives you the advantage of exposing negative listings which you can fight against using a credit repair service.

2. Take steps to settle any outstanding debts

New lenders will want to know what you’ve done to address your past credit mishaps, so ensure that any defaults are paid and you do the right thing by your previous creditors.

3. See if a credit repair service can help you

Some default listings, if placed on your file without proper adherence to the relevant laws, can be removed from your file. A credit repair specialist can help you in this regard. Removing negative listings from your credit file can see you apply for a regular home loan, avoiding the higher fees and interest rates of a bad credit home loan.

4. Apply for a loan with a specialist lender who looks beyond the numbers

Certain lenders in Australia specialise in bad credit home loans. These lenders, such as La Trobe Financial, Bluestone, Pepper and Liberty Financial, look at your credit file and take into account that a default or two can result out of a lifestyle change, such as divorce or illness, and will take into account your income and other factors to still grant you a loan, even if you’re a discharged bankrupt or have negative listings on your file.

5. Don’t apply for too many loans in one space of time

Your credit file includes all previous enquiries for credit, which includes past loan applications. Be careful with who you apply for a home loan with if you already have bad credit, as too many enquiries in the same space of time can present another red flag to prospective lenders, as it could indicate money management problems.

6. Tell your Finance Broker about your bad credit listings honestly

Tell us about each of your bad credit issues before we help you apply. If need be, you might have to organise a face-to-face meeting with us to give you the right opportunity to explain your credit history. This will give your lender more information to go on when deciding whether to approve or deny you a loan.

7. Think about Lender’s Mortgage Insurance (LMI) before you apply

In Australia there are only two major LMI providers, Genworth and QBE. They have their own lending criteria which they use to evaluate your loan, which can in some cases be stricter than that of your lender, leading to your application being rejected. Some lenders don’t use these insurers, meaning there’s no third party risk of being rejected for a home loan because of LMI. In most cases, these lenders, such as Liberty Financial and Pepper, will have their own LMI alternative.

8. If you can avoid applying with a spouse with bad credit do so

If your partner is the one with bad credit, sometimes you can avoid rejection and the higher interest rates of a bad credit loan by applying as a single applicant. This will obviously reduce your borrowing power, so consider this before applying this tip.

9. Eliminate your other debts to make your file look better

When your chosen lender looks at your application, they’ll take into account all of your current credit accounts, including credit cards and personal loans. If you can pay these off and close them before applying it’ll be one less factor that will work against you when your lender decides whether to approve or reject you. This is because your lender will look at your total capacity to pay off a loan, and if you have a number of credit cards – even if they’re not currently being used or maxed out – your lender could see this as a red flag.

About the author

Matt Carra

Matt Carra

Matt Carra is the Owner of Blue Key Finance, a Finance Broker since 2004, an SMSF Lending Specialist, a Property Investment Educator, and a Mentor to new Finance Brokers entering the finance industry. Matt is passionate about providing valuable guidance and honest advice, educating Australians on how to buy their first homes and invest successfully while protecting them with knowledge. Matt has strong long-term relationships with his panel of lenders and extensive knowledge on their credit policies, and utilises that skillset to give you peace of mind by recommending you to the right lender the first time, to negotiate a better deal, and to fight for your cause – that’s Matt’s commitment to you. Contact Matt today to start the conversation on 0425 726 538 or email