You Can Get a Better Interest Rate Even If You Have Bad Credit

Usually, people with a bad credit history have to go to a specialist lender, which charges a higher interest rate, in order to get approved for a home loan. This being the only option at your disposal, you may still get the same interest rates as someone with a clean credit file.

If you qualify with a major bank or lender, you can automatically get a more competitive interest rate. You can apply with a major bank, if your bad credit history consists of nothing more than a paid non-financial institution debt of less than $1,000 such as a missed electricity, water or phone bill.

Would you always need to pay higher interest rate when dealing with a specialist lender?

With a specialist or non-conforming lender, it is rare for you can to get lower interest rate but you’ll need to meet the following requirements:

•    A minor bad credit history: You won’t get low interest rate if you have unpaid defaults or multiple bad credit records.

•    Proof of your low risk borrower: You need to have high-income professional(an accountant, doctor or lawyer) or Low risk professions(nursing or teaching).

•    Stable employment: You need to be working for at least 3 to 6 months in your current job role. If you’ve switched then you should be working in the same industry for at least 2-3 years.

•    Standard property: You must be buying a low risk property type.

You can also refinance your bad credit home loan

You’re eligible to refinance out of a bad credit home loan if you can meet standard bank criteria, meaning:

•    Your home loan is currently at an LVR of 80% or less(for some banks 90% LVR).

•    You’ve paid all of your defaults and they no longer appear on your credit file.

•    You can provide full evidence of your income.

•    Your repayments for the last 6 months have been perfect.

If this does not work, you can still get a mortgage broker to help you get the most suitable mortgage rate in Australia.

Is there a need to wait for my credit to improve in order to get better interest rates?

It’s recommended that you wait for your credit file to clear. This increases your chance of qualifying with a major bank at a sharper interest rate. You can improve your credit score through credit repair with the help of a professional.