What to Do If You Have a Bad Credit Score (and Still Want a Home Loan)
A low credit score makes getting a home loan harder, not impossible. In Australia, Equifax scores below 460 sit in the "below average" band, and this is where mainstream bank lending gets genuinely difficult. But you still have real options: checking your credit file for errors, understanding what's actually dragging your score down, working with a specialist lender that assesses bad credit applications differently, or taking six to twelve months to rebuild your score before applying. None of these require you to just wait and hope.
I get asked about this more than almost anything else, usually from someone who assumes a bad credit score means the door is closed forever. It doesn't. It changes which lenders will consider you and what kind of loan you'll be offered, but there are still paths forward, and the worst thing you can do is apply blind and rack up more rejected applications, which damages your file further. Here's what's actually going on, and what to do about it.
What actually counts as a bad credit score in Australia?
Australia has three main credit bureaus, Equifax, Experian, and illion, and each uses its own scale, which is part of why this gets confusing. Equifax, the bureau most banks check first, scores you from 0 to 1,200. According to Equifax's own published bands, a score of 0 to 459 is "below average," 460 to 660 is "average," 661 to 734 is "good," 735 to 852 is "very good," and 853 to 1,200 is "excellent."
Most mainstream banks start getting genuinely cautious below the 500 to 550 mark, and a score under 460 is where standard lending criteria become the hardest to meet. If you've checked your score and it's sitting below that, it's worth understanding why before you do anything else.
What actually drags a credit score down?
A few things do most of the damage:
Missed or late payments, even small ones like a phone bill or a Buy Now Pay Later instalment, since BNPL providers have reported to credit bureaus since June 2025 Defaults, which can drop your score by 100 to 200 points on their own.
Too many credit applications in a short period, including multiple BNPL sign-ups, since each one shows up as an enquiry High credit card utilisation, meaning you're regularly close to your limit rather than paying it down Bankruptcy or a debt agreement, which stays on your file for a set period and affects lending significantly.
Since Comprehensive Credit Reporting came in, your file also reflects positive behaviour, not just the bad stuff. That's actually good news, because consistent on-time payments now actively rebuild your score, not just prevent it from getting worse.
Should I check my own credit file first?
Yes, always, before you apply for anything. You're entitled to a free copy of your credit report from each bureau, and it's the only way to see exactly what's on file, including whether there's an error. You can get a free copy of your credit report by clicking this link (https://www.equifax.com.au/personal/) Incorrect or outdated listings are more common than people expect, a default that should have been removed after the standard period, an account that isn't actually yours, or a listing from an old address mixed up with someone else's file. If you find an error, you have the right to dispute it directly with the credit bureau, and getting it corrected can lift your score without you doing anything else.
Can I still get a home loan with bad credit?
Sometimes, yes, just not necessarily through a mainstream bank. Specialist and non-conforming lenders exist specifically to assess applications that don't fit standard bank criteria, and they look at your situation differently, including your current income, your explanation for what happened, and how long ago it occurred. These loans usually come with a higher interest rate to reflect the higher risk, and the terms vary a lot between lenders, so this is exactly the kind of situation where comparing across a panel matters more than usual.
The other option, if your situation allows it, is to spend six to twelve months actively rebuilding your score before you apply anywhere, which can open up better rates and more lender options than going in now with a low score and a higher-rate specialist loan.
What should I actually do first?
Start with these steps, in order:
Pull your free credit report from Equifax, Experian, and illion, and check every listing on it.
Dispute anything incorrect directly with the relevant bureau Get a clear picture of what's genuinely dragging your score down, so you know whether it's fixable quickly or needs time.
Talk to a broker before you apply anywhere, since multiple declined applications in a short window can damage your score further.
That last point matters more than people realise. Every application you submit shows up as an enquiry, and a string of rejected applications looks worse to a lender than one well-prepared application to the right lender the first time.
Frequently Asked Questions:
How long does a default stay on my credit file?
Generally around five years from the date it was listed, though it depends on the type of default and when it occurred. It's worth checking the specific listing date on your file rather than assuming.
Will checking my own credit score hurt it?
No. Checking your own score is a "soft enquiry" and doesn't affect your score. It's only when a lender checks your file as part of a credit application that it's recorded as a "hard enquiry."
Do all lenders check the same credit bureau?
No. Different lenders check different bureaus, and some check more than one. This is part of why your options can genuinely change depending on which lender you apply with.
Is it better to wait and rebuild my score, or apply now with a specialist lender?
It depends on your timeline and your situation. If you're not in a rush, rebuilding your score for six to twelve months can open up better rates. If you need to move now, a specialist lender may be the only realistic path, and I can help you weigh up whether that trade-off makes sense for you.
Where this leaves you:
A low credit score is a starting point, not a verdict. Most people I speak with in this situation assume they're locked out entirely and forever, and that's rarely actually true. The right first step is understanding exactly what's on your file and why, not guessing or avoiding it.
Whether you're dealing with a low score right now or refinancing once it's rebuilt, get in touch and I'll walk you through your genuine options. Book a free call by clicking here (https://calendly.com/aprilsix), or see how I can help with refinancing once your situation has improved.
Sources and References: Equifax Australia — What Is a Good Credit Score?
Office of the Australian Information Commissioner (OAIC) — credit reporting rights and correcting your credit file, referenced via Equifax's published guidance
National Consumer Credit Protection Act — Buy Now Pay Later regulation from 10 June 2025
Any information or advice contained on the April Six Pty Ltd website is general in nature only and has been prepared without considering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.
April Six Pty Ltd is a Credit Representative of Astute Financial Management Pty Ltd | Australian Credit Licence 364253
© April Six Pty Ltd | ACN: 667183735 | Credit Representative Number 554762
About the author: Eshanee is the founder of April Six, a mortgage broker for first home buyers and first-time property investors, and a Credit Representative (554762) of Astute Financial Management Pty Ltd. Get in touch at hello@aprilsix.com.au or 0488 471 888.
