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, what credit score they want, car loans with bad credit, 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
General information only. It doesn't take into account your objectives, financial situation or needs. Check the lender's key facts sheet, credit guide and TMD before you apply. We don't compare every lender, and we may earn a commission if you apply through our links.
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
What credit score do lenders want?
No single score guarantees a loan: under responsible lending a lender also has to check your income, expenses and debts. What a score does is show how risky your file looks. Moneysmart puts it simply: a higher score means a lender will consider you less risky, which could mean a better deal, and a lower score will affect your ability to get a loan or credit.
Scores run from zero to 1,000 or 1,200 depending on the credit reporting body, and each describes its bands differently, so compare your score with that body's own bands:
| Band | Experian score | Equifax: where the score sits among credit-active Australians |
|---|---|---|
| Excellent | 800 to 1,200 | Top 20% |
| Very good | 700 to 799 | 61% to 80% |
| Good | 500 to 699 | 41% to 60% |
| Fair (Experian) or Average (Equifax) | 300 to 499 | 21% to 40% |
| Low (Experian) or Below average (Equifax) | 0 to 299 | Bottom 20% |
Car loans with bad credit
You can sometimes get a car loan with a poor credit history, but it usually costs more, and the lenders most willing to say yes tend to be the most expensive. Security helps: a loan secured by the car is less risky for the lender than an unsecured one, so it's more likely to be approved and usually cheaper. A guarantor can help too, but they become liable for the whole debt if you can't pay. Compare the total cost of the loan, fees included, as well as the repayment.
If you're buying privately, search the car's VIN on the PPSR for $2 first, so you don't take on someone else's car debt. And if what you need is a repair rather than another car, a No Interest Loan covers car repairs, up to $2,000 with no interest or fees. Our car loans guide covers car loans on Centrelink.
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. It says most payday lenders charge an establishment fee of 20% of the amount borrowed and a monthly fee of 4%, 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, furniture, car repairs and registration, medical or dental costs, education and work costs, or up to $3,000 for a rental bond or disaster recovery, with no interest, fees or charges. It pays the supplier's invoice; it can't be used for cash, bills, rent or other debts. 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, and you've lived at your current address for at least 3 months (exceptions apply). 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
General information only. It doesn't take into account your objectives, financial situation or needs. Check the lender's key facts sheet, credit guide and TMD before you apply. We don't compare every lender, and we may earn a commission if you apply through our links.
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.
What is the easiest loan to get with horrible credit?
No legitimate lender can skip the affordability checks, so there's no loan that's easy to get with very bad credit, and the lenders most willing to say yes tend to charge the most. A No Interest Loan is the exception for essentials: it doesn't use a credit check, and instead checks you can afford the repayments. Be wary of anyone promising guaranteed approval, and call the National Debt Helpline (1800 007 007) before borrowing.
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.
Can I get a $5,000 car loan on Centrelink?
Centrelink doesn't offer car loans. Some lenders count Centrelink income, but they still have to check you can afford the loan, and with bad credit it will usually cost more. For car repairs, a No Interest Loan lends up to $2,000 with no interest or fees, and Services Australia may advance you $250 to $500 of JobSeeker or a similar payment (more for pensioners), repaid over 13 fortnights.
What credit score is needed for a $30,000 car?
There isn't a set score. A lender looks at your credit report and score alongside your income, expenses, debts and the car itself. Scores in Experian's 'good' band (500 to 699) or Equifax's 'good' grade or higher sit around the middle of the population or above. Below that, Moneysmart says a lower score will affect your ability to get credit, so a smaller loan, a cheaper car or a secured loan can help.
How long does it take to get your credit score from 500 to 600?
There's no fixed timeline. Your score is recalculated as new information reaches your report: on-time repayments are recorded each month and count for two years, while enquiries and most defaults drop off after five years. Paying every account on time, keeping balances low and not applying for new credit are what move it. On Experian's scale, 500 and 600 are both in its 'good' band.
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.