Getting Approved | Conquering Bad Credit Home Loans

Dreaming of owning a home but unsure about bad credit home loans? Think again. Your past money troubles don’t have to hold you back from getting a house.

April 8, 2024

Estimated reading time: 7 minutes

Author:

Thomas Makin

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Home / Learning Centre / Bad Credit Home Loans

Bad credit home loans, also called non conforming loans, are for people with a poor credit history. Lenders see these loans as higher risk, so they have higher interest rates and stricter requirements.

Many reasons exist why someone may have a bad credit history:

Whatever the reason, having a bad credit history can make it challenging to secure a traditional home loan.

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Raising your credit score in Australia is important for improving your financial stability and getting better loan and credit terms. For individuals with a less-than-ideal credit history, the path to a healthier credit score involves a combination of diligent financial management and proactive strategies. Here are key actions to consider:

Access your credit report annually from major credit bureaus like Equifax, Experian, or Illion. Scrutinise it for inaccuracies or discrepancies and take immediate steps to rectify any errors found. This action can help ensure your credit file accurately reflects your financial history.

Ensure all bills and loan instalments are paid punctually. Late payments can detrimentally affect your credit score, so setting reminders or automating payments can be beneficial.

Actively work towards paying down outstanding debts. Prioritise those with higher interest rates while keeping your credit card balances well below their limits. Demonstrating control over your debts can positively impact your credit score.

High balances relative to your credit limit can signal to lenders that you’re over-reliant on credit, potentially harming your score. Aim to keep your credit utilisation low.

Each application for credit can lead to a hard inquiry, which may temporarily reduce your score. Apply for new credit only when necessary, and consider the timing of these applications carefully.

Having a credit account with a positive repayment history can aid in building or improving your credit score. Consider maintaining active accounts with a record of timely payments.

If you face financial challenges, engage with your creditors to discuss alternative payment arrangements. Ignoring obligations can lead to more significant score reductions.

Improving your credit score is a process that requires time and consistency. Adopting and maintaining good financial habits is paramount for a gradual and steady improvement in your credit score.

For those with a bad credit history, it’s crucial to understand that while the journey to improving your credit score involves discipline and patience, the long-term benefits of a higher score are significant. Enhanced creditworthiness opens the door to better loan conditions, lower interest rates, and increased financial opportunities.

To apply for a bad credit home loan, you will need to provide the same documentation as you would for a traditional home loan. This includes proof of income, employment history, and identification. You may also need to provide additional documentation, such as a letter explaining your bad credit history and steps you have taken to improve it.

The loan to value ratio (LVR) is the amount you are borrowing compared to the value of the property you are purchasing. For example, if you are borrowing $300,000 to purchase a home valued at $400,000, your LVR would be 75%. Lenders typically prefer a lower LVR, as it reduces their risk.

To increase your chances of being approved for a bad credit home loan, it’s essential to have a stable income, a low LVR, and a good explanation for your bad credit history. It can also be helpful to work with a mortgage broker who specialises in bad credit home loans, like ScaleMortgage.

Specialist lenders are financial institutions that specialise in providing loans to individuals with challenging credit histories. These lenders have more flexible lending criteria and are more willing to take on higher-risk borrowers.

Specialist lenders can help you secure a bad credit home loan by considering your individual circumstances and providing a loan that meets your needs. They can also offer advice and guidance on how to improve your credit score and increase your chances of being approved for a traditional home loan in the future.

ScaleMortgage is a leading mortgage broker in Australia, specialising in bad credit home loans. With years of experience and a team of expert brokers, ScaleMortgage can help you navigate the complex world of bad credit home loans and secure the best loan for your needs.

ScaleMortgage can help you in several ways:

Don’t let your bad credit history hold you back from achieving your homeownership goals. With the help of ScaleMortgage, you can navigate the world of bad credit home loans and secure the home of your dreams. Contact us today to learn more about our services and how we can help you become a homeowner in Australia.