Mr says
Often, yes. Bad credit is considered case by case. Lenders look at what happened, how long ago, whether it's been paid or settled, and what the business looks like now. Property security helps most, because it gives the lender a fallback. Recent on-time repayments, lodged BAS and an honest explanation also help. Multiple recent defaults with no explanation and no security are the hardest combination.
Key points
- Bad credit is considered case by case, not screened out automatically.
- Age, cause and resolution of each listing matter.
- Property security offsets credit risk more than anything else.
- Check your own credit report first and fix errors.
- Defaults listed
- Generally 5 years (7 for a clearout)
- Bankruptcy on file
- 5 yrs from start or 2 yrs after end, whichever later
- Free credit report
- Every 3 months
Does bad credit rule me out?
No. Mr hears from plenty of owners with bruised files who still borrow. What changes is which lenders will look and how the loan is structured. Banks tend to screen bruised files out early. Private and non-bank lenders are more likely to consider them case by case, weighing the credit history against everything else: security, trading, purpose and how the loan will be repaid.
What exactly do lenders look at?
Not just “good” or “bad”. They read the detail:
| Question | Why it matters |
|---|---|
| What is the listing? | A default, judgment or insolvency each read differently |
| How old is it? | A four-year-old default weighs less than last month’s |
| How big was it? | A small utility debt is not a large business debt |
| Was it paid or settled? | Shows the debt was dealt with |
| What caused it? | A dispute, illness or one bad customer is understandable |
| What’s happened since? | Recent on-time repayments rebuild confidence |
| Is it the business or a director? | Both are checked for business lending |
How long do things stay on a credit file?
According to Moneysmart, a default generally stays on your credit report for five years, or seven years in the case of a clearout. Paying it doesn’t remove the listing, but your report will show it’s been paid.
For bankruptcy, AFSA says it normally lasts 3 years and 1 day, and credit reporting agencies keep a record for 5 years from the date you became bankrupt or 2 years from when it ends, whichever is later.
What improves my chances?
- Property security. The single biggest lever. With equity behind the loan, a lender has a fallback, so credit history carries less weight. A second mortgage can do this without touching your home loan.
- Paid or settled listings. If an old default can be paid, pay it.
- A short written explanation for each listing: what happened, what you did, why it won’t recur.
- Recent clean conduct. Six months of business bank statements without dishonours or overdrawn days.
- Lodged BAS and tax returns. One less unknown.
- A sensible request. A smaller first facility, or a clear purpose that earns or saves money.
What should I avoid?
- Applying everywhere. Each formal application can be recorded. A string of them makes the next lender warier. See whether asking about a loan hurts your credit.
- Hiding it. It will show up. Better it’s on the table from the start.
- Anyone promising “guaranteed approval” or asking for large fees upfront before any assessment.
Secured or unsecured with bad credit?
| With good equity | Without property | |
|---|---|---|
| Realistic options | Secured loans, $20k to $5m | Smaller unsecured facilities, case by case |
| What carries the deal | Equity and exit | Recent trading and bank statements |
| Guarantees | Property owners, often directors | Directors |
More on the trade-off in secured or unsecured business loan.
An illustrative example
A Logan plumbing business has two defaults on one director’s file, both from three years ago when a builder went under owing them money. Both were later paid. The business has traded steadily since, BAS is lodged, and the director owns a home with good equity. A private lender looks past the defaults, given the explanation, the payments and the security, and offers a secured loan for new vans. A bank had declined the same application on credit score alone.
What should I do first?
- Get your free credit report — you’re entitled to one every three months.
- Check for errors and dispute them.
- Write your explanation for each listing.
- Gather six months of bank statements and your latest BAS.
- Talk to a specialist before applying anywhere.
If a lender has already said no, read why business loans get declined to work out the real reason.
What should my explanation letter say?
Keep it to a page and stick to facts. For each listing:
- What it was — the creditor and the type of listing.
- When — the month and year.
- Why it happened — briefly and without blaming everyone else.
- What you did — paid, settled, disputed, arranged a plan.
- What’s changed — new systems, a new bookkeeper, a different customer base, a resolved personal situation.
Attach proof where you have it: a payment confirmation, a settlement letter. A clear, honest page often does more for an application than any amount of security.
Is a court judgment worse than a default?
Lenders tend to treat judgments seriously, because they show a creditor went to court to recover a debt. But the same questions apply: how old, how large, what for, and has it been paid? A small, old, paid judgment arising from a genuine dispute is very different from a recent, unpaid one. If a judgment has been paid, get evidence of that and include it. If one is wrong, take advice about having it set aside rather than leaving it on your record.
Bruised credit, solid business?
Mr won’t judge. Tell us about it in about 60 seconds — what’s on your file, roughly when, and what’s changed. There’s no credit check to enquire, your details aren’t fired off to lenders who’ll decline on sight, and a real person will tell you honestly what’s possible and with whom. Accurate credit details on the form are what get you to the right lender first time. See if you qualify.
Frequently asked questions
How long does a default stay on my file?
Moneysmart says a default generally stays on your credit report for five years, or seven years for a clearout. If you pay it, the listing remains but shows it's been paid.
Can I borrow after bankruptcy?
Possibly, once discharged. AFSA says bankruptcy normally lasts 3 years and 1 day, and credit reporting agencies keep a record for 5 years from the date you became bankrupt or 2 years from when it ends, whichever is later. Lenders consider post-bankruptcy applications case by case, usually with security.
Does paying a default improve my chances?
Yes. A paid default reads much better than an unpaid one. It shows the debt was dealt with.
Should I mention my bad credit on the enquiry form?
Yes. Being upfront means you're matched with lenders who consider it, instead of discovering a decline halfway through.