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Many lenders offer specialised products for borrowers with defaults; however, they may have certain provisions put in place. Some examples may include a higher interest rate and Lenders Mortgage Insurance.

What is a default on my credit file?

A default is a credit related infringement that is recorded on your credit report. The following information are some examples of a default on your report:

1. A payment default of $100 or more that is 60 days or more overdue



2. A clearout – If you owe money, but the credit provider was unable to make contact after several attempts



3. A bankruptcy order within the last seven years



4. Details of credit applications made in the last five years.

This information is accessed by a lender when you apply for a home loan and could affect your chances of being successful.

What if I have an unpaid default?

Although having a default on your credit report is bad, it is even worse if you have an unpaid default and could be detrimental to your home loan application.

Even if there was a misunderstanding or a mistake occurred, it may be better for you to repay the debt as soon as possible and then speak with the company who issued the bill. An unpaid default is a major red flag for lenders and could mean the difference between a loan approval and decline. 

Can I apply for a home loan if I have a credit default?

Many lenders offer specialised products for borrowers with defaults; however, they may have certain provisions put in place. Some examples may include a higher interest rate and Lenders Mortgage Insurance. 



In order to give yourself the best chance of success, there are simple steps you can take. These include:

• Give a letter of explanation and evidence clarifying the reason for the default. 



• Save as large of a deposit as you can – aim for 20% of the purchase price to help avoid Lenders Mortgage Insurance



• Repay any unpaid default and ensure the company changes it on your credit report



• Before applying for a loan, make an effort to pay off as much debt as possible and repay bills on time. This may help show the lender that although you have made a mistake in the past, you are making an effort to change.