Bad Credit Loans

What Counts as “Bad Credit” in Australia?

In Australia, your credit score is a number between 0 and 1,200 (using the Equifax scale). A score below 500 is generally considered below average, while anything under 400 is considered low. However, a credit score is only part of the picture. Lenders also look at specific events on your credit report, and these events carry significant weight in any lending decision.

The types of entries that raise red flags include defaults (when a debt of $150 or more is overdue by 60 days or more), court judgments, bankruptcy, Part IX debt agreements, and multiple credit inquiries in a short period. Even a single default can make it difficult to get approved with mainstream lenders, regardless of your overall score. If you have experienced any of these, it does not mean you cannot get a loan. It simply means the right approach matters.

Why Banks Decline Bad Credit Applications

Banks use automated credit scoring systems that flag any negative events on your credit report. These systems are designed to minimise risk across thousands of applications, which means they apply strict rules that leave little room for individual circumstances. If you have a default from three years ago that has since been paid, or a period of financial hardship caused by illness or job loss, most bank systems will still decline your application automatically.

This is where specialist lenders differ. They use manual assessment processes that allow an underwriter to review your full situation rather than relying purely on a score. A real person looks at your application, considers the context behind any credit issues, and makes a decision based on your current financial position. This is why working with a broker who has access to these lenders can make all the difference.

Types of Bad Credit Loans Available

There are several options depending on your situation. Secured personal loans (using a car, boat, or other asset as security) are often the easiest to get approved for with bad credit because the lender has reduced risk. Unsecured personal loans for smaller amounts may be available through specialist lenders, though rates will be higher since there is no asset backing the loan.

Guarantor loans allow someone with good credit to guarantee your loan, which can improve your chances and your rate. Debt consolidation loans can help if you have multiple debts contributing to your credit issues, rolling everything into one manageable repayment. You can learn more about secured loans and debt consolidation on our dedicated pages.

How Interest Rates Work for Bad Credit Loans

Interest rates for bad credit personal loans are higher than standard personal loans because the lender is taking on more risk. Rates typically start from around 12.99% p.a. and can go higher depending on the severity of your credit issues. While this is more expensive than a standard loan, it is often significantly cheaper than payday lenders or short-term credit providers who can charge equivalent annual rates of 40% or more.

The rate you are offered will depend on your specific credit history, the loan amount, whether you can provide security, and your current income and expenses. As you make on-time repayments, your credit score will gradually improve, and you may be able to refinance at a lower rate in the future. Many of our clients have done exactly this within 12 to 24 months of taking out their initial loan.

How to Check Your Credit Report

Before applying for any loan, it is a good idea to check your credit report. In Australia, you can get a free copy of your credit report from three main reporting bodies: Equifax, Experian, and illion. Checking your own report does not affect your credit score, so there is no downside to doing it.

Review your report carefully for errors, as incorrect information is more common than you might think. If you find a mistake, you can dispute it directly with the reporting body. Understanding what is on your report helps you know where you stand before applying and allows your broker to match you with the most suitable lender for your specific situation.

Steps to Rebuild Your Credit Over Time

Rebuilding credit takes patience, but it is absolutely achievable. The key is consistency and making deliberate changes to how you manage your finances going forward. Here are some practical steps you can take:

• Pay all current bills and obligations on time. Set up automatic payments where possible to avoid accidentally missing due dates.
• Reduce credit card balances and avoid maxing out your available credit. Keeping your utilisation below 30% of your limit is a good target.
• Do not apply for multiple loans or credit cards at once, as each application adds an inquiry to your file.
• If you take out a bad credit loan, consistent on-time repayments will demonstrate financial responsibility and help build a positive repayment history.

Defaults fall off your credit report after 5 years, and serious credit infringements after 7 years. Many of our clients have improved their credit scores significantly within 12 to 24 months of taking responsible steps. The important thing is to start, and getting the right loan through the right lender is often that first step.