“Bad credit narrows your lender options and increases your rate. It does not make refinancing impossible.” [cite: 310]
Whether you can refinance with adverse credit depends on what is on your file, how recent it is, and what your current equity position looks like. [cite: 311] Major banks have strict credit criteria and will decline most applications with defaults or missed payments. [cite: 312] Specialist non-bank lenders exist specifically for this segment of the market and assess applications differently. [cite: 313]
What counts as bad credit for lenders
Paid or unpaid defaults, court judgments, multiple credit enquiries in a short period, missed payments on existing loans, and current Part 9 or Part 10 debt agreements all affect your credit position. [cite: 315] Lenders weight recency heavily. A default from five years ago is treated very differently from one from six months ago. [cite: 316]
Specialist non-bank lenders
A number of non-bank lenders including Pepper, Liberty, and La Trobe Financial have specific products for borrowers with impaired credit histories. [cite: 318] Approval criteria are more flexible, but the trade-off is a higher interest rate, typically 1 to 3% above standard variable rates depending on the severity of the credit impairment and the LVR. [cite: 319]
What improves your position
- A lower LVR (more equity) compensates for credit risk in many lender models. [cite: 321]
- Demonstrating at least six months of clean repayment history on all current obligations helps. [cite: 322]
- Having defaults formally settled and documented as paid also strengthens the file. [cite: 323]
- Working with a broker who specialises in non-conforming lending makes a material difference, as they know which lenders will view your file most favourably. [cite: 324]
You may consider seeking independent advice from a licensed mortgage broker or financial professional to assess your personal circumstances. [cite: 325] This information is general in nature and does not take into account your objectives, financial situation or needs. [cite: 326] Lender credit policies and product availability vary. Speak with a licensed mortgage broker to assess your specific credit position. [cite: 327] All loans are subject to lender approval. [cite: 328]
Sources: ASIC MoneySmart, Credit Scores Explained 2025; Savings.com.au, Bad Credit Home Loans 2025; Canstar, Refinance Home Loan Comparison 2026. [cite: 329]
