What’s considered bad credit?

Your credit history can be a reflection of how consistent you’ve been as a borrower and bill payer, but there can be times when these responsibilities get the better of you. If you’ve ended up with a black mark on your report, the road to home ownership might seem like its paved with pitfalls that stop you at every turn. However, this isn’t the end of the journey. Bad credit home loans are a product designed for all kinds of borrowing situations, especially for those with an inconsistent credit history. 

All it takes is a conversation with your broker to determine whether a bad credit mortgage could be the right option for you. So what are some things that can show up on your credit report? Let’s take a look at three common types of impaired credit.

1. Missed home loan payments

No matter your current financial situation, if you’ve had problems meeting you home loan obligations in the past – be it late or missed payments, or even a default – this will show up on your credit report and be reflected in your overall score. Conventional lenders can be quite wary when they see this type of impairment. Even if you’ve settled a missed payment and improved your financial standing, your history could suggest to them that you won’t be able to take on further debt.

This doesn’t need to stop you from receiving finance. A specialist broker can advise some of the home loan options available to you. For instance, you may want to refinance your standard mortgage for a bad credit home loan, which could also work in your favour if interest rates have dropped recently.

2. Company in trouble

Are you self-employed? While running your own business can come with a plethora of benefits, both personal and professional, you might have run into financial trouble in the past and faced bankruptcy or insolvency as a company. This activity can stay on a director’s credit report for five years or longer, according to the Australian Financial Security Authority.  As a result, it can also impact your standing with conventional lenders.

Your specialist broker at Redrock can work through this situation with you. For instance, you may need to prove that you receive income from another source.

3. Too many debts

Your credit report doesn’t only show instances when you’ve missed a bill – it’s also a record of when you’ve applied for additional lines of credit, be it on bank cards or multiple personal loans. If your debts appear out of proportion to your income, a traditional lender may have declined your application for a prime home loan. This doesn’t need to block your chances of owning property.
Rather than sending your application off to numerous lenders, only to be declined, they will discuss your individual circumstances and determine which mortgage will suit your scenario, as well as the requirements.