Is your mortgage application stopped because of your credit history? 

If your credit file is not perfect and you can’t show enough income proof, many lenders might see you as a big risk and reject your loan. Luckily, if you provide the right documents, you can still get approval. 

The Basics: Can you get approved? Do you qualify for a low doc loan with bad credit? 

Borrow up to 85% of the property value. Provide limited proof of your income (keep reading for more details). Have an active Australian Business Number (ABN). Explain your credit history to the lender.

What about interest rates? There isn’t a fixed price for a low doc loan with a bad credit history. The lender uses a risk matrix to decide how risky your application is and sets the interest rate accordingly. 

Here’s what affects your rate: 

• Credit history: The better your credit history, the better your rate. 
• LVR (Loan to Value Ratio): Higher borrowing percentages mean higher rates. 
• ABN age: Some lenders charge more if your ABN is less than two years old. 
• Income evidence: More proof of income means a better rate. 

What do they look for in your credit history? Lenders have different policies. Some consider applications that others won’t, and they price the same loans differently. They consider: 

• Size of credit issues: Smaller defaults are better than larger ones. 
• Age of the issue: How long ago did it happen, and was it settled quickly? 
• Multiple issues: Several defaults at once might be a one-time problem, but if they’re spread out, it could indicate long-term hardship. 
• Default status: Current, paid, unpaid, cleared, or settled – each is assessed differently. 
• Bankruptcy & Part IX: How long ago was the issue, and are you discharged? 

How will they assess my property? All lenders want a standard property in good condition and a good location. This is so you can sell it easily if you face financial trouble. Banks prefer units or houses in capital cities or major regional locations. Vacant land, construction, hobby farms, and small towns are considered high-risk properties. 

Does the loan purpose matter?  

Yes, it does. Lenders look at: 

• Refinancing: They check if you’re releasing equity and the repayments of your current loan. 
• Property purchase: They may look at if you saved the deposit yourself or your rental history. 
• Other purposes: Business funding, investment properties, or shares are assessed based on their merits. 

Who might not get approved?  

People might not get approved if: 

• They can’t afford the loan. 
• They can’t provide the required limited income evidence. 
• The security property is outside the lender’s guidelines. 
• They don’t have a big enough deposit. 
• They are currently bankrupt. 

Income Evidence 

 Low doc doesn’t mean no financials. These loans still need some income proof as required by the Nation Consumer Credit Protection (NCCP) Act. Common forms include: 

• Business Activity Statements (BAS): Shows your business turnover, indicating profitability. 
• Accountant’s letter: Some lenders accept a letter from your accountant confirming your income. 
• Business account statements: Show your business turnover, indicating profitability. 

You’ll also sign an income declaration form, telling the lender about your business income. The income you declare must make sense for your age, assets, and job type. 

How will they calculate my income?  

Your income is assessed as the lower of what you declare or what the lender assesses. Lenders typically use 40% to 60% of your BAS or business bank statements turnover to assess your income. It varies based on your business. For example, a cafe might have 40% of its BAS turnover assessed as income, while a consultant might have 80%. 

Are no doc loans available?  

Yes, you can get a no doc loan with bad credit, but the interest rate might be high. Your loan must be unregulated by the NCCP Act.