Your finances can get a bit out of control sometimes, for all sorts of reasons. Illness, divorce, redundancy – or even just getting overwhelmed with things to do and accidentally missing a bill payment.
The end result can be that you’re put in the bad credit basket. Even if you sort it out and pay overdue bills or fix a default on a loan repayment, you can still have a black mark against your name afterwards. So while you may feel like you’ve moved on, lenders can still see historical issues on your credit file.
Understandably, if you’re in that situation it can feel overwhelming, so let’s tackle the issue and look at where you stand.
What is bad credit?
Bad credit generally refers to a history of falling behind on repayments or experiencing financial events that affect your borrowing profile. The result is that it can become more difficult to gain approval for a home loan or other forms of finance.
The reason many lenders may hesitate is because they see you as presenting a higher level of risk. Essentially, they want confidence that regular repayments can be maintained.
If you’re unsure where you currently stand, understanding how credit scores work can provide some useful insight.
How do you end up with a bad credit record?
There are several things that can contribute to a poor credit history, including:
- Unpaid bills or missed loan repayments
- Going over your credit card limit
- Previous bankruptcy
- Divorce-related financial hardship
- Registered credit defaults
- Part IX or Part X debt agreements
- Extended time off work without income
- Too many credit enquiries within a short period
How do you know if you have a bad credit record?
Often, people don’t realise there is an issue until they apply for finance. You may suddenly discover you’ve been labelled “non-conforming” because you don’t fit a lender’s standard policy requirements.
Sometimes even relatively small issues, including accidental missed repayments, can affect borrowing options.
What can you do?
The good news is there are more lending options available than just the major banks. Some non-bank lenders take a more personalised approach and understand that financial circumstances can change unexpectedly.
Rather than relying purely on credit history, they may assess your broader financial position and circumstances.
Depending on your situation, alternative lending structures or low doc home loan options may be worth exploring.
If your current home loan structure is contributing to financial pressure, it may also be worth considering whether refinancing your home loan could improve your situation.
So if you’ve had a home loan application declined because of credit defaults, it doesn’t necessarily mean the door is closed. There may still be options available.
Some specialist lenders take a more holistic approach and assess borrowers on individual circumstances rather than relying solely on traditional lending criteria.
If you’d like more information on obtaining a home loan after experiencing credit issues, call us today on 1300 714 984 or get a quote online. We may be able to connect you with lending solutions if traditional lenders have said no.
