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  1. #1
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    Default Home loan... Bad credit ... Help

    Hi all,

    DH and I are getting ourselves in order this year, we are finally on top of bills, savings are starting to go up instead of always having to dip into them like we have in the past. We went through a really rough patch years ago and made some really bad money decisions and ended up with bad credit. But I desperately want our own house, that we can make our own. That we can pay off instead of paying off for someone else. And something with a yard for our kids. The place we are living in now does not have enough room. We are out growing it (5 people in a 1.5 bedroom house) has anyone come out the other side of bad debt and purchased a house? How did you do it? Can we get rid of this bad debt hanging over our heads? HELP! Please.

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    Default Home loan... Bad credit ... Help

    Firstly, get a copy of your credit files, you can get them for free through Veda. The credit system changed in March 2014, and we are on a scored system - much like the US. The changes mean that if you are late on a bill, the creditor can report that on your credit file which reduces your overall 'score.' You can get your credit score once per year from a website called getcreditscore.com.au - it won't give you your credit file but it will give you an indication of your credit score.

    It will be difficult for you to get a home loan if you have any unpaid defaults or court judgements against your name unless you try with a broker or a non-conformist lender, in which case your interest would likely be higher if you were to be approved (not likely with unpaid defaults though). What I'd suggest is firstly, get a copy of your credit file, find out if you have defaults against your name and pay or 'settle' these debts (settle meaning make a reduced offer to the debt agency for say 60-70% of the total debt) - a paid default looks better than a settled default.

    Even if your defaults are paid, you may still find you cannot get approved for a home loan but it's a start to getting back on track. Lastly, you'd need at least a 10% deposit or you'll find most lenders won't look at you - & given that you possibly have bad credit, you need as much going for you as possible.

    I have worked in finance for years, not bank lending, but have a bit of experience interpreting credit files etc. Hope I have helped you find which direction to take

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    BH-KatiesMum  (16-01-2015)

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    We are in the process. Its a lot harder but definitely possible. My best advice is see a good, reputable mortgage broker. They will be able to best advise you, and can seek lenders who deal with bad credit homeloans.
    Our mortgage broker has found us a lender willing to give us a go. We will have to pay higher interest for a period of time, but providing we stay on track with repayments, we will have the option to drop the rate or change to a lower rate later. We also have to hold our savings (and preferably add regularly) for 6 months so the lender cam see we are capable and responsible, also that we have enough to cover extra costs such as stamp duty, conveyancing etc upfront. It also shows them that we are able to afford rates etc (as advised by our broker).

    Make sure any debt you have is paid off, or at the very least being paid off. Be up front and completely honest about your credit, the mistakes you made and why. The more open and honest you are, the better it will be for you. If the broker or lender feel you are withholding information or lying about your situation, they will be a lot more hesitant to help.

    Its also better (and preferred) you have a minimum 20% deposit of the amount you want to borrow.

    I would speak to a mortgage broker first and foremost, they will be able to give you the best advice based on your individual situation.
    Last edited by SheWarrior; 14-01-2015 at 11:11.

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    We got a loan easy I had a vodaphone bill unpaid from like (7 years but was only $90!) so I guess it was a mistake.

    We did the Veda check our mortgage broker told us too and cleared everything on there. Kept saving. Few banks didn't want to touch us. Ended up with a homeloan (not as flexible as others) and my deposit was big!!

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    Thanks guys, some good information to know. We have paid everything but one thing but that will be paid off by mid year. Which is a good start. I'll check Veda and the credit file too thanks. I'll look for a mortgage broker to have a chat to as well thanks👍

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    Hi again. Just wanted to say thanks again. I called a mortgage broker and he was fantastic. Told me much the same as you all, he was positive that we would be able to get one in the future and he never made me feel bad for being bad at this money thing before. I did think we would never be able to get a loan for a house but everything is being paid off we are making a good start to savings, bills are now in credit (that feels awesome) and by the time things are paid off then we should have a decent amount saved. He did tell me that the bad credit is on our file for 5 years once it's paid off but we would be able to borrow 85% of the value of the house we wanted to buy and it would be a higher interest rate. It sucks but we made mistakes and we are paying for it. We thought that would be the case though if anyone even looked at us. So I'm positive about it and it feels good that things are starting to look up when there was a point when we owed so much money that I couldn't see how we could ever pay it all back and bankruptcy was looking good because all we had in bills was final notices and disconnection warnings. There is a light at the end of our tunnel and even though it's not going to happen right away (like I would like.. Miss impatient) it will happen ... Eventually. Woohoo!!

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    BH-KatiesMum  (16-01-2015),ChelleBH  (16-01-2015),SheWarrior  (16-01-2015)

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    Glad to hear it OP! You may have higher interest to begin with, but once you have secured finance, after a couple of years of good payment history & clear credit files you can shop around for a better rate :-)

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    Its such a good feeling hey!! We never thought we would be able to buy, but thanks to a generous family and excellent mortgage broker we are just a few short months away from our dream becoming a reality! Just knowing that first step has been overcome.... can't describe it

  12. #9
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    BH-KatiesMum is online now Community Manager
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    thats great @bigZ

    as Chelle says - once you have it in place, and a good track record, you can always shop around for a better deal


 

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