Defaulting a home loan

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Defaulting on a home loan means a borrower has not fulfilled the conditions of repayment of a debt.

A default occurs when your payment is 60 days late, or if the lender has been unable to contact you. A default can relate to your home loan, but it could also include utility bills, credit card repayments and even your mobile phone contract. A default will remain on your credit file for 5 years, and in some cases, even 7 years.

Defaults will appear on your credit file with the status of either being ‘paid’, ‘unpaid’ or ‘settled’.

A default that is considered settled applies in cases where arrangements have been made between the borrower and lender, for payment of the overdue balance.

When you default on an obligation, your credit record will note it and your credit score will also fall. It’s possible to repair your credit score by actively paying bills and loan obligations on time or earlier for a period of time.

If your credit score falls under a certain level, major lenders will no longer be prepared to lend to you, and you might be forced to seek alternative lending arrangements.

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Non-conforming Loans

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Non-conforming Loans are granted by a lender who offers loans for people with bad credit. This could be as a result of a poor credit history, but it could also be due to your personal circumstances or even your type of employment.

Borrowers with a history of bad credit, bankruptcies or judgments are normally the ones who will be looking for a non-conforming lender. In Australia, Pepper, Bluestone, Liberty, Resimac and La Trobe Financial are lenders who will work with borrowers with bad credit.

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Boosting Your Credit Score / Fixing Your Debts

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There are a number of ways you can lift your credit score and make yourself more appealing to lenders:

• Pay off your debts if you are able to
• Always pay your bills the day you receive them
• Reduce your credit utilization to under 30%. Utilization is the amount of credit you're using compared to your credit limit. It is also possible to reduce utilization by increasing your credit limit
• Check to make sure your credit report doesn’t contain any errors
• Follow up with creditors in the event of a debt or repayment that has been incorrectly recorded
• Speak to a credit repair company if you feel your credit score is not reflective of your use of credit in the past.
• Look at refinancing your high-interest debts, such as your home loan or even a personal loan, into a lower rate loan if possible.

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