How to get a home loan with a bad credit score?

Getting a home loan can be a challenging task, especially if you have a bad credit score. That being said, if you have your finances in order—and your credit score is a reflection of difficult life circumstances where you missed payments—then your less-than-ideal credit history does not necessarily mean you're ineligible for a home loan.

Lenders generally rely on credit scores to assess an individual's creditworthiness and determine the terms of a loan, but this is only one factor. Lenders will generally also consider things such as your income, expenses, and existing loans. 

With careful planning and strategic steps, it's possible to improve your chances of securing a home loan, even with a bad credit score. Here’s what you need to do…

1. Know your credit score and history

If you don’t know what your credit score is, the first thing you should do is get a copy of your credit report from credit reporting agencies such as:

  • Experian: call 1300 783 684
  • Illion: call 132 333
  • Equifax: call 138 332

Understand the factors contributing to your low credit score and identify any errors or discrepancies that can be corrected. At the very least, being aware of your credit situation is important for knowing what you need to do to improve it.

2. Improving your credit score

While it may take some time, improving your credit score is one of the best things you can do to improve your borrowing power. One of the first changes you can make—if you haven’t begun doing so—is to pay your bills on time and reduce your overall debt. 

Additionally, if you can, avoid taking out any new loans and maintain a low credit utilisation ratio. Over time, these responsible financial habits can help raise your credit score. Yes, you can’t undo the past, but if lenders see that you’re on the right track, they’ll usually take that into account.

3. Save for a larger deposit

Part of having a poor credit rating is that banks will generally require you to have a larger initial deposit for your home loan. By saving up more money to put towards your home, you demonstrate financial stability and reduce the risk for lenders. 

You should generally aim for a deposit of at least 20% of the property's value, although if you can it will help to save more. Unfortunately, having a bad credit score means that the banks see you as a risky investment, so a larger deposit is one of the ways you can make yourself a “safer” borrower. 

4. Seek professional guidance

Consulting with a financial advisor can provide valuable insights into your home loan options. Having an expert evaluate your financial situation and give you personal advice might be just what you need if you’re struggling with bad credit. 

Keep in mind that, while a bad credit score presents challenges when obtaining a home loan, it doesn’t mean you’ll never get one. By taking proactive steps to improve your credit score, saving for a larger deposit, and seeking professional advice, you can increase your likelihood of securing a home loan. 

Patience and persistence are essential, as the journey towards improving your credit score may require a lot of time and effort. However, if you’ve already gotten to a point where you’re ready to take out a home loan and don’t know which lender to go with, then you’re in luck. At Mozo, we have a range of home loan providers on our database that you can compare so you get the loan that works best for you.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 16 June 2024 Important disclosures and comparison rate warning*
  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Discount Variable Home Loan

    • Owner Occupier
    • LVR<70%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Variable Home Loan 90

    • Principal and Interest
    • LVR <90%
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • The Better Home Loan Special Offer

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

image of houses

Need help with refinancing?

You might have questions that need personal answers. We’ve teamed up with the mortgage brokers at Lendi to get you the answers you need, and a home loan deal you deserve.

Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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