Bad Credit Car Loans

This is the part most people are never told. A decline from a major bank is often not a judgment on whether you can afford the loan. It is the output of a scoring model.

The majors mostly rely on automated credit scoring. Your file goes in, a number comes out, and if that number sits below the cut-off the answer is no. The computer never asks why the default is there, whether it was a disputed phone bill, or what has changed in the two years since. Nothing about your explanation reaches a person, because no person reads it.

Specialist lenders work differently. A human credit assessor opens the file and reads the story behind it: what happened, when it happened, and what is different now. A small default on a utility account you had already closed reads as what it is. Steady income and twelve clean months read as recovery. That is why a file one bank declines automatically can still be worth putting in front of an assessor who will actually read it.

The right lender is rarely the one advertising on TV. Our panel of more than 30 lenders includes specialist and non-bank lenders alongside the majors, and for a credit-impaired application it is almost always one of the specialists. Knowing which assessor reads which kind of file is most of the work, and it is why a single targeted application beats shopping yourself around. Every approval is still subject to lender criteria and credit assessment.

Bad credit is not one thing, and lenders do not treat it as one thing. It helps to know what is on your file and how long it stays there.

• Defaults. A default can be listed once a payment is at least 60 days overdue, the amount is $150 or more and the required notices have been sent. It stays on your file for five years from the listing date, whether you pay it or not.
• Repayment history. Lenders report whether each monthly payment on a loan or card was made on time, and that history is held for two years. A clean recent run counts for more than most people expect.
• Credit enquiries. Every full application is recorded for five years, approved or declined. Your file does not say which, so a cluster of enquiries over a few weeks reads as someone being knocked back repeatedly.
• Bankruptcy and debt agreements. A bankruptcy stays on your credit file for five years from when it started, or two years from discharge, whichever is later. A Part IX debt agreement is treated the same way. Both also sit permanently on the National Personal Insolvency Index, which lenders can search.

There is no single score. Equifax, Experian and illion each calculate their own and lenders use different ones, so a flat decline from one bank does not settle the question. Read your own file before you do anything else. A free copy is available from each credit reporting body, listings are sometimes made in error, and having a wrong default corrected costs nothing.

This is the most useful thing on this page. Every full car loan application leaves an enquiry on your credit file, and the file does not record the outcome. A lender seeing six enquiries over two months cannot tell whether you were shopping or being declined, so it assumes the less flattering of the two.

Some lead-generation sites make this worse: one form is passed to several lenders and each can lodge its own application. People arrive with eight enquiries in a month and a file harder to place than before they started.

We work the other way around. You tell us your situation, we read it against our panel and their current credit policies, and we come back with where you stand and who we would approach. Nothing is lodged, and no credit check happens, until you have seen that and told us to proceed. Then we apply once.

Having your documents ready is what makes a single application work:

• Driver licence. Front and back.
• Two recent payslips. Or your last tax return and BAS if you work for yourself.
• 90 days of bank statements. Every account, including savings, credit cards and any buy now pay later facility.
• A note on the blemish. Short and factual: what happened, when, and what has changed since.

That last one carries weight. Specialist assessors read files by hand, and a default with a date, a reason and evidence the reason has passed reads very differently to one with silence around it.

We would rather tell you now than walk you through an application that was never going to work. These are the situations where the answer is usually no.

• An undischarged bankruptcy. While you are still bankrupt, car lenders will not lend, and there are limits on what you can borrow without your trustee's consent. What changes it: discharge, usually three years and a day, then clean conduct afterwards.
• A Part IX agreement in arrears. A few lenders will look at an agreement being paid as agreed. Very few will look at one behind. What changes it: getting the agreement back on track, or completing it.
• Very recent unpaid defaults to a finance lender. A default listed in the last few months and owed to a bank or a car lender is the hardest kind to place. What changes it: time first, then paying it.
• Income a lender cannot verify or cannot use. Cash in hand, a job you started last week, or a calculation that does not work once rent and existing commitments are counted. What changes it: a few pay cycles in the role, or borrowing less.
• A fresh run of declines. If you have been knocked back three or four times this month, the next lender is reading those enquiries and little else. What changes it: three to six quiet months.

None of that is a judgment on you; it is how credit policies are written. Tell us where you are and we will say plainly what we would need to see instead.

You can change the shape of your application before you make it.

• Put money down. A deposit cuts the amount at risk and shows you can save. On a credit-impaired application it is often the difference between a decline and an approval, and it lowers what the loan costs you.
• Hold your job. A few months in the same role, or steady business income on your statements, carries real weight. If you work for yourself, our self-employed car loans page covers what lenders accept.
• Let old listings age. Defaults drop off after five years. If one is close, waiting a few months can genuinely change which lenders will read your file.
• Close what you do not use. An unused credit card counts against you at its full limit, and so does a buy now pay later account sitting at zero. Closing them frees up more capacity than people expect.
• Keep the next 90 days clean. No dishonours, no overdrawn accounts, and no new credit of any kind, buy now pay later included. Recent conduct is weighted heavily.

With an impaired file, the car can decide the answer on its own.

Age and kilometres. Most lenders set a maximum vehicle age at the end of the loan, not the start. A fifteen-year-old car on a five-year term is outside many policies before anything else is looked at. High kilometres narrow it further.

Dealer or private sale. A licensed dealer purchase is simpler. Fewer lenders allow private sales, and those that do often apply a loading or a lower maximum, because there is no dealer warranty and the lender must verify the seller and the money trail itself.

What the car is worth. Lenders lend against a valuation, not the asking price, so if the price sits above book value you cover the difference. Heavily modified vehicles, some imports and repairable write-offs are declined outright by most lenders.

Money still owing on it. We check the Personal Property Securities Register before settlement. If the seller still owes on the car, that must be cleared or the lender will not pay out, so on a private sale it is worth raising early rather than on pick-up day.

If you have your eye on a particular car, send us the listing with your enquiry. It often decides which lenders we can approach at all.

Be clear-eyed about this. Finance for an impaired file costs more than finance for a clean one, because the lender is pricing a higher chance of loss. We will show you the full cost in writing, including fees and the total you would repay, before you commit. If that number looks too high, say so: sometimes the right answer is a cheaper car or a bigger deposit.

Two things worth saying plainly. Do not borrow the maximum simply because it is offered: a repayment you can meet in a bad month is a better loan than one you can only meet in a good one. And a loan taken on an impaired file does not have to be permanent. Twelve to twenty-four months of payments made on time builds the recent repayment history mainstream lenders read, so plenty of people use the first loan exactly that way: get the car, rebuild the file, refinance later. Refinancing is subject to the same lender criteria and credit assessment as any other application, so check your contract for an early payout cost before you count on it.

One caution about the rest of the market. If something promises approval regardless of your credit, or asks a fee up front to clean up your file, walk away. Credit repair rarely removes a correct listing, and nobody can commit a lender to a decision it has not made.