Bad credit happens for all sorts of reasons: illness, divorce, redundancy, causing you to miss payments and end up with a black mark against your name. Even if you do manage to pay the overdue bills, clear your debt, or fix up a default on a loan repayment, your credit history may still be impaired. Read on to find out what bad credit is and what your options are when it comes to securing a home loan with bad credit.
What is bad credit?
‘Bad credit’ means you’ve ended up with a history of not keeping up with some payments and the result is that you’re not easily able to get approval for any new loans or credit. The reason many lenders will now steer away from you is because they see you as a high risk. The bottom line is that they’re concerned about your ability to make regular repayments on your loan if you’ve missed regular payments on other loans in the past.
How do you end up with a bad credit record?
There are a few things that can leave you with a ‘bad credit’ record. These include:
• Having unpaid bills or loan payments.
• Going over your credit card limit.
• Having been declared bankrupt in the past.
• A divorce leaving you in debt.
• Registered credit defaults against your name.
• A part 9 or 10 Debt Agreement.
• Having time off work with no pay because you were ill.
• Your credit file having ‘too many' credit checks run on it by potential lenders.
How do you know if you have a bad credit record?
Most times you wouldn’t really know. It’s not until you apply for a loan that you find out. Then you suddenly find you’ve been labelled ‘non-conforming’ by the lender you had an application with, because you don’t fit their lending rules. It doesn’t matter if the credit issues were large, small or even accidental, in the lender’s eyes, the fact that you missed payments has made you a candidate that is now too high-risk.
What can you do?
While many mortgage lenders do not offer loans to people with bad credit, some lenders actually do lend to borrowers with lower scores. It’s also worth noting that there are other lenders out there aside from the major banks.
Some non-bank lenders understand that circumstances beyond your control can sometimes lead to a missed payment, default or even bankruptcy. They will talk with you one-on-one to learn more about what went on and then look at how they might be able to work towards a solution for you.
If you’ve had a home loan application turned down because you’ve had credit defaults, it doesn’t mean your home ownership journey is over. It also doesn’t mean you have to wait to be in the clear before you can apply again. There are other options.
Non-bank lenders like Pepper Money may be able to help you with specialist loan features outside a basic or standard variable home loan. Along with taking a more holistic approach, they will usually look at your individual circumstances before making a decision.
If you’d like more information on how to get a home loan if you’ve had bad credit, get in touch with our team today. We may be able to put you in touch with a lender that can help you, even if the major banks have already turned down your home loan application.
Disclaimer: Original content source: Pepper Money. It is designed for publication through Accredited Brokers, to provide you with factual information only, and it is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. If you need financial or tax advice you should consult a licensed financial or tax adviser. The information in the article is believed to be reliable at the time of distribution, but neither Pepper nor its accredited brokers warrant its completeness or accuracy. For information about whether a non-bank loan may be suitable for you, call us on your number.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA)