Loans with bad credit: your options, the costs and the risks
You can sometimes get a loan with bad credit, but it will usually cost more, the amount may be smaller, and some of the lenders most willing to say yes are the most expensive. Before you apply, check your credit report for free, fix any errors (also free), and consider a No Interest Loan or a free financial counsellor on 1800 007 007.
This guide explains what "bad credit" actually means on an Australian credit report, how long negative information stays, what lenders look at, the costs of no-credit-check and payday loans, and how to rebuild your credit. We don't recommend lenders, and nobody can legally guarantee you approval.
By Better Rate Mate Editorial Team · Last reviewed
Can you get a loan with bad credit?
Possibly. Every licensed lender must assess whether you can afford the loan and whether it's suitable, so a poor credit history isn't an automatic no, and a good one isn't an automatic yes. What changes is the price and the choice: with defaults or missed payments on file, mainstream lenders may decline or offer a higher rate, and you're more likely to be offered expensive short-term credit.
Ask yourself first whether a loan will fix the problem or add to it. If you're borrowing to cover living costs or other debts, a financial counsellor can often find a better way through, at no cost.
What's on your credit report, and for how long
Your credit report is held by credit reporting bodies; Moneysmart names the two main ones as Experian and Equifax, and they can hold different information. Your score runs from zero to 1,000 or 1,200 depending on the agency. Since comprehensive credit reporting became mandatory for the big banks from 1 July 2021, your report also shows positive information: the accounts you hold, their limits and your monthly repayment history.
| Information | How long it stays |
|---|---|
| Credit enquiries (each application) | 5 years |
| Defaults (overdue debts of $150 or more, 60+ days late) | 5 years (7 years if the lender couldn't contact you) |
| Serious credit infringements | 7 years |
| Repayment history | 2 years |
| Financial hardship arrangements | 1 year |
| Court judgments | 5 years |
Check and fix your report first, for free
You have a right to a free copy of your credit report every three months from each agency, and also if you've been refused credit in the last 90 days. Check every account and default is yours and the details are right.
If something is wrong, ask the agency or the lender to fix it; that's free. You can't remove correct information, even if it's negative. Moneysmart warns that credit repair firms may charge high fees for things you can do yourself, and paying one may not improve your score. If you can't get an error fixed, you can complain to the Australian Financial Complaints Authority (AFCA) for free.
What lenders look at
Under responsible lending rules, a lender has to make reasonable inquiries, verify what you tell it and not offer an unsuitable loan. In practice that means:
- Your credit report: defaults, missed payments in the last two years, recent enquiries and existing limits
- Income and how stable it is, including Centrelink payments
- Living expenses and existing debts, including buy now pay later
- The loan amount, term and any security (a car or a guarantor can make approval more likely)
- Whether the loan meets your needs and you can repay it without substantial hardship
The costs of no-credit-check and payday loans
Ads promising "no credit check" or "guaranteed approval" usually point to small, short-term loans with high fees, or to lenders who price bad credit into much higher rates. Moneysmart's warning is blunt: a payday loan isn't the cheapest way to borrow money fast. The fees on a short loan can equal a large share of what you borrow, and taking a second loan to repay the first is how debt spirals start.
Be especially careful with anyone who asks for an upfront fee before approving you, won't give you the costs in writing, or pressures you to sign quickly. Check a lender holds an Australian credit licence on ASIC's professional registers.
No Interest Loans: the cheapest option if you qualify
A No Interest Loan (NIL) lets you borrow up to $2,000 for essentials such as appliances, car repairs and registration, medical or dental costs and education, or up to $3,000 for a rental bond or disaster recovery, with no interest, fees or charges. There are no credit checks; instead a worker checks you can afford the repayments. You're eligible if you have a Health Care Card or Pension Card, earn under $70,000 as a single person or $100,000 with a partner or dependants, or have experienced family or domestic violence in the last 10 years. Good Shepherd runs the scheme through community organisations; call 13 64 57 or find a provider on its website.
Get free help before you borrow
The National Debt Helpline (1800 007 007, 9:30am to 4:30pm on weekdays) connects you with a free, confidential and independent financial counsellor. Counsellors can check your options, negotiate with creditors and help with hardship requests. If you're already behind on a loan, you can ask your lender for a hardship variation under the National Credit Code; a hardship arrangement won't affect your credit score.
How to rebuild your credit
Moneysmart's steps are simple and they work over time:
- Pay every bill and repayment on time; repayment history covers the last two years
- Keep credit card balances well below the limit, and cut limits you don't need
- Limit applications: each one stays on your report for five years
- Check your report each year and fix errors
- Set up direct debits or reminders so you don't miss due dates
What to watch for
- Nobody can legally guarantee approval. Treat "guaranteed approval" and "no credit check" ads with caution.
- Never pay an upfront fee to be approved for a loan.
- Credit repair firms can't remove correct information, and fixing errors is free.
- Every application adds an enquiry for five years; don't apply to several lenders at once.
- Borrowing to repay other debts can deepen the problem. Talk to a financial counsellor first.
Common questions
Can I get a loan with bad credit?
Sometimes, but expect a higher rate and a lower limit, and be wary of expensive short-term lenders. Check your credit report for errors first, consider security or a guarantor, and look at a No Interest Loan if you need up to $2,000 for essentials.
Can I get a loan with extremely bad credit in Australia?
Options narrow sharply, and the lenders still willing to lend tend to be the most expensive. A No Interest Loan doesn't use credit checks. The National Debt Helpline (1800 007 007) can help you work out what's realistic without taking on more debt.
Can I get a $5,000 loan if I have bad credit?
Possibly from some lenders, at a higher cost. You'll need to show you can afford the repayments. If the money is for essentials, a No Interest Loan covers up to $2,000 ($3,000 for a bond or disaster recovery) with no interest or fees.
How long does bad credit last in Australia?
Defaults and credit enquiries stay on your report for five years, serious credit infringements for seven, missed payments in your repayment history for two years, and hardship arrangements for one year.
Can a credit repair company remove defaults?
Only if the default is wrong, and you can have an incorrect listing fixed yourself for free. Correct information can't be removed by anyone, however much they charge.
Free help
If repayments are getting hard, call the National Debt Helpline on 1800 007 007 (9:30am to 4:30pm on weekdays) for free, confidential financial counselling, or ask your lender's hardship team for help before you miss a payment. This page is general information, not financial advice.
