Bad Credit Home Loans Australia | Lagos Financial

A bad credit home loan is a mortgage designed for borrowers who have credit impairments — such as defaults, court judgements, or a discharged bankruptcy — that prevent them from qualifying with mainstream lenders. Specialist non-bank lenders assess applications on a case-by-case basis, looking at your overall situation rather than just your credit score.

Types of Credit Issues

Different credit events carry different levels of impact on your borrowing options:

  • Paid defaults — Debts that were overdue and listed on your credit file but have since been paid. Many lenders will consider you if the default is paid and at least 12 months old.
  • Unpaid defaults — Still outstanding debts listed on your credit file. Options are limited but specialist lenders can help, especially if the defaults are small.
  • Court judgements (writs) — More serious than defaults. Specialist lenders will assess the amount, age, and whether it has been satisfied.
  • Part IX debt agreement — A formal arrangement to repay debts. Most lenders require this to be completed and discharged for at least 12-24 months.
  • Discharged bankruptcy — Most mainstream lenders require 2-3 years post-discharge. Specialist lenders may consider you from day one of discharge.
  • Low credit score — Below 500 on Equifax. Some lenders use different scoring models and may still approve you.

What Specialist Lenders Offer

Specialist or “non-conforming” lenders assess your application holistically, considering:

  • The age and nature of credit events (recent vs old, paid vs unpaid)
  • Your current income and employment stability
  • The size of your deposit (larger deposits offset credit risk)
  • Your recent repayment history (6-12 months of clean conduct matters)

Interest rates from specialist lenders are higher than standard rates — typically 1-3% above mainstream — but they provide a pathway to home ownership that major banks do not offer. As you rebuild your credit, you can refinance to a better rate.

How to Improve Your Position

  • Pay outstanding defaults — A paid default is always better than an unpaid one
  • Maintain clean conduct for 6-12 months — Pay all bills on time, especially rent and utilities
  • Save a larger deposit — 20%+ significantly improves your options
  • Get a copy of your credit report — Check for errors and dispute any inaccuracies
  • Speak to a broker early — A broker can tell you exactly where you stand and what to work on

How Lagos Financial Helps

With access to specialist non-bank lenders that major banks and comparison sites do not list, Lagos Financial can assess your full credit history and identify lenders with policies that match your situation. We have helped borrowers with paid defaults, discharged bankruptcies, and low credit scores secure home loans and begin rebuilding their financial position.

Frequently Asked Questions

How long do defaults stay on my credit file?

Defaults remain on your Equifax, Experian, or Illion credit file for 5 years from the date of listing. After 5 years, they are automatically removed. Court judgements remain for 5 years from the date of the judgement.

Can I get a home loan with a discharged bankruptcy?

Yes. Some specialist lenders will consider you from the date of discharge. Most mainstream lenders require a waiting period of 2-3 years post-discharge. A larger deposit (20-30%) and stable employment significantly improve your options.

Will I be stuck with a high rate forever?

No. Bad credit loans are typically a stepping stone. Once your credit file clears (defaults removed after 5 years) or your property equity grows, your broker can refinance you to a mainstream lender at a significantly lower rate. Lagos Financial proactively monitors your situation and recommends refinancing when the time is right.

Get Expert Advice from Lagos Financial

With close to 20 years of experience and access to 60+ lenders, Victor Lagos and the Lagos Financial team can help you find the right loan for your situation. Book a free assessment or call us to discuss your options.

Our Services

Lagos Financial offers a full range of mortgage broking services across Australia:

We serve clients in Sydney, Bondi Junction, Brisbane, Launceston, and Australia-wide.

About the Author
Victor Lagos is a licensed mortgage broker (ACL 546774) and founder of Lagos Financial, with close to 20 years of finance industry experience since beginning his career at Bluestone Mortgages in 2006. A member of the Finance Brokers Association of Australia (FBAA) since 2015 and the Australian Financial Complaints Authority (AFCA — 98399), Victor helps Australians build wealth through tailored home loan and property investment strategies, working with 60+ lenders nationwide. Last reviewed: March 2026.

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