One of the major concerns of a lender is to determine if you will be able to repay the loan you are applying for. A bad credit history results in a big concern in this regard.
With almost all transactions now being carried out online and the results of transactions being shared by the credit rating agencies, a simple default in clearing your dues can result in bad credit history, making it difficult to obtain credit from the lenders, even if the default was not your mistake. As such, it is very important for you to keep a tab on your credit history and immediately raise any dispute that you might have on any default with the concerned authority.
A bad credit history occurs when a person fails to pay off his monetary obligations (bills, taxes, etc.) on time, or has a debt obligation which is far more than his assets or what he can handle.
Borrow up to 90%-95% of property value depends on your circumstances
Default in loan repayment
A default is recorded in your credit file when you fail to clear your dues in time for a personal loan, credit card bill, tax, or utility bills, etc. This shows an inability to pay your debt (presumed ‘intentional’ in the first instance) and most of banks and other lenders will decline your loan application, as they are not confident of getting their money back from you. A default recorded in your credit history can remain there for at least two years.
Bankruptcy
Being declared a bankrupt means that you are unable to repay your debts. As such, lenders will not lend you any money until you are not discharged, meaning that the Court has certified that you are no longer within the category of being unable to pay off your debts. However, being discharged does not guarantee that you will be repaying your debts on time.
Once you are ‘discharged’ from bankruptcy, lenders will consider lending you money. You are no longer required to have limited assets, can travel overseas, and can apply for loan again.
Part 9 Debt Agreement
If you have entered into a debt agreement with your creditors (meaning that you have requested concession on your repayment obligations and the lenders have agreed to forgo part of the debts), the Part IX Agreement will remain in your credit file for up to 7 years. It is possible to have lenders to consider your loan application when you have fulfilled your Part IX Agreement.
Tax debt
If you have a huge tax debt owing to Australian Taxation Office (ATO), not many lenders will be interested in giving you a home loan. However, you could ask for a Tax Debt Home Loan wherein the ATO debt is added to mortgage, thereby leaving the borrower tax debt free.
Do note that it is still the prerogative of the lender to consider offering you such a loan.
Debt consolidation
Debts do not necessarily result in bad credits. However, there might be situation where your total debt cost is going through the roof, thereby making you ineligible for a home loan.
This type of loan allows borrowers with many small unmanageable debts to combine them and make it a single mortgage to repay one simple a consolidated amount monthly.