Can I get a home loan if my credit score is below 600 in Australia?

Yes, it is possible for individuals in Australia with a credit score below 600 to get a home loan, but they face challenges such as higher interest rates and stricter loan conditions. Alternative lenders may offer "bad credit home loans" or "non-conforming loans" specifically tailored for those with poor credit histories. Prospective buyers should consider improving their credit score through practical steps like debt consolidation and timely payments, and exploring non-traditional pathways to homeownership such as rent-to-own schemes or obtaining a co-signer.

In Australia, securing a home loan typically requires a good credit history, evidenced by a strong credit score. A score below 600 often indicates to lenders a higher risk associated with the borrower, potentially making it challenging to obtain financing for a home purchase. However, understanding the implications of a low credit score and exploring available options can help prospective buyers navigate this obstacle.

Understanding Credit Scores in Australia

A credit score in Australia is a numerical expression based on an analysis of a person's credit files, representing the creditworthiness of an individual. Derived from credit reports, scores range from 0 to 1,000 or 1,200 depending on the credit reporting agency. A score below 600 is generally considered poor, indicating to lenders a history of difficulties in managing credit or making repayments on time.

Impact of a Low Credit Score on Loan Eligibility

A credit score below 600 can significantly impact a borrower’s ability to secure a conventional home loan. Lenders use this score to assess the risk of lending money, with lower scores often leading to either outright loan denials or less favourable loan terms such as higher interest rates and more stringent loan conditions. This is done by lenders in an attempt to mitigate potential risks.

Alternative Lending Options

For those with credit scores under 600, traditional banks might not be an option, but alternative lenders may provide a solution. These lenders often offer "bad credit home loans" or "non-conforming loans" specifically designed for individuals with poor credit histories. While these loans can come with higher interest rates, they do provide an avenue for purchasing a home despite having a low credit score. Speak to an expert mortgage broker to help you find a suitable lender for your situation.

Steps to Improve Your Credit Score

Improving your credit score is crucial and entirely possible through several strategic actions:

  • Debt Consolidation: Combining multiple debts into a single debt with lower interest rates can help manage repayments more effectively.
  • Timely Payments: Ensure that all bills and existing loan repayments are paid on time. Setting up automatic payments can help avoid missed deadlines.
  • Credit Card Balances: Lower the balances on your credit cards. High credit utilisation can negatively affect your credit score, so aim to keep balances well below the credit limit.

Preparing to Apply for a Home Loan with a Low Credit Score

Applying for a home loan with a low credit score requires careful preparation:

  • Documentation: Gather all financial documents such as recent bank statements, payslips, and existing debt records to present a comprehensive picture of your financial health.
  • Compensating Factors: Demonstrating a stable job with a steady income or having a larger deposit can act as compensating factors to counterbalance a low credit score.
  • Financial Planning: Consider consulting with a financial advisor to discuss how to present your finances most favourably to potential lenders.

Considerations and Risks

It's important to carefully consider the potential drawbacks and risks of securing a home loan with a low credit score:

  • Higher Costs: Loans designed for low credit scores often come with higher interest rates and additional fees, increasing the overall cost of borrowing.
  • Long-term Financial Impact: Accepting unfavourable loan terms can lead to financial strain over time, potentially leading to difficulties in making mortgage repayments.

Alternative Strategies for Home Ownership

For those unable to secure a traditional mortgage due to a low credit score, alternative paths to homeownership might be viable:

  • Rent-to-Own Schemes: These allow you to rent a home with the option to buy it later, often building equity in the process.
  • Co-signing: Having a family member or friend with a better credit score co-sign the mortgage can improve eligibility.
  • Waiting and Improving Credit: Sometimes, it's advisable to delay purchasing a home until your credit score improves, reducing long-term costs and increasing buying options.


Obtaining a home loan with a credit score below 600 in Australia is challenging but not impossible. By understanding how credit scores impact loan eligibility, exploring alternative lending options, and taking steps to improve your financial standing, you can enhance your chances of securing a mortgage. Prospective homebuyers should focus on credit improvement strategies and seek professional financial advice to navigate this process effectively.

If you're considering buying a home but are concerned about your low credit score, start by consulting with financial advisors or credit counsellors. These professionals can help you understand your credit report, suggest ways to improve your score, and explore suitable mortgage options. Taking proactive steps today can significantly improve your home buying prospects in the future.

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