Bad credit refinance
Refinancing a Home Loan With Bad Credit
A default, a past bankruptcy or a run of missed repayments doesn’t always rule out a refinance. Some lenders look at credit issues differently from others, and these loans usually cost more. We check which lenders on our panel of 40+ may consider you, and compare the total cost with staying where you are.
What lenders look at
Credit issues aren’t all treated the same.
Lending criteria, fees and charges apply.
The type of issue
Lenders weigh a late credit card payment differently from a default, a court judgment or a bankruptcy. Some specialist lenders may consider paid or unpaid defaults, and some may consider applicants after a bankruptcy has ended. Others won’t look at any of these. Each lender sets its own policy.
How long ago it happened
A credit issue from several years ago, followed by a clean record, often reads differently from one in the last few months. Moneysmart says your credit report shows repayment history for the last two years, and a default stays for five years, or seven in the case of a clearout.
Your current loan
When you refinance, your repayment history on your current home loan matters. Some lenders may consider recent arrears if you can explain them and they’re now up to date.
Your equity
Your equity sets your loan-to-value ratio (LVR). With less than 20% equity, lenders mortgage insurance may apply, and some lenders cap the LVR lower for borrowers with credit issues. Check yours with the LVR calculator.
Before you apply
Check first, then apply once.
Get your credit report
You can get your credit report from Equifax and Experian at no cost every three months, according to Moneysmart. Each may hold different information, so it’s worth checking both. If anything is wrong or out of date, ask the agency to fix it.
Avoid applying with several lenders
Each credit application can be recorded on your credit report. Applying with lender after lender and being declined can make the next application harder. We look at lender policy for your situation first, then apply where it fits.
Weigh the cost
Loans for borrowers with credit issues usually cost more than standard loans. If your current rate is lower than what a new lender would offer, staying put may be the better choice for now. Our refinance calculator shows how long switching costs take to recover.
Consolidating debts
If you want to roll other debts into your home loan, read our guide to debt consolidation refinancing first. A longer loan term can mean paying more in total.
Struggling with repayments now? Talk to your lender’s hardship team, or call the National Debt Helpline on 1800 007 007.
Related
More on refinancing.
Refinance home loans
How a loan review works, start to finish.
Read more →Specialist home loans
Self-employed, credit issues and other non-standard situations.
Read more →Cost of refinancing
The fees to check before you switch.
Read more →Check your credit score
How to get your report and what it shows.
Read more →Questions
Common questions, straight answers.
Can I refinance my home loan with bad credit?
Possibly. Refinancing is a new application, so the new lender looks at the type and age of the credit issue, your income and debts, your equity and how you’ve repaid your current loan. Some lenders consider past credit issues that others won’t. Approval is always up to the lender.
Which lenders refinance with bad credit?
It depends on the issue. Some specialist lenders may consider paid or unpaid defaults, court judgments, a discharged bankruptcy or recent arrears, while other lenders won’t. Policies change, so we check current lender policy for your situation rather than guessing.
How long does a default stay on my credit report?
Moneysmart says a default stays on your credit report for five years, or seven years in the case of a clearout. Paying it shows the default as paid, but it stays for the same period.
Are bad credit home loans more expensive?
Usually, yes. Loans for borrowers with credit issues often have higher rates and fees than standard loans. A refinance only makes sense if the new loan still works out better for you overall, so we compare the total cost.
Will checking my options hurt my credit score?
Talking to us about your options doesn’t, on its own, put an enquiry on your credit report. A credit application does, which is why we look at lender policy first and only apply where it fits.
Can I fix my credit report before refinancing?
If something on your report is wrong or out of date, you can ask the credit reporting agency to fix it, and Moneysmart notes this costs nothing. Only incorrect information can be removed.
Talk through a refinance with past credit issues.
No obligation. No pressure. Just honest answers.
We don’t charge you for our service. Lenders pay us a commission if you go ahead with a loan.