Car finance with bad credit: what to know

Plenty of Australians have a credit blemish of some kind: an old default, a few late payments, or simply not much credit history. The good news is that some lenders specialise in these situations. The less good news is that rates are usually higher. Here is how to approach it sensibly.

What counts as a credit blemish?

• Defaults listed on your credit file
• Late or missed payments
• Court judgments, bankruptcy or a debt agreement
• A thin or new credit file

Steps that help

1. Check your credit report. You can request a free copy from the credit reporting bodies. Look for errors.
2. Avoid applying everywhere. Each application can leave an enquiry. A broker can approach the most suitable lenders first.
3. Show stability. Time in your job and at your address count in your favour.
4. Consider a deposit or trade-in. It can lower the amount you borrow and the lender’s risk.
5. Choose the car sensibly. A reliable, reasonably priced car is easier to finance than a stretch purchase.

Rates and refinancing

Expect a higher rate than someone with a clean file. If you make repayments on time, you can look at refinancing after a year or two, when your profile may look stronger. Check any early payout fee first.

Be wary of

• Anyone who guarantees approval before looking at your situation
• Large upfront fees
• Loans where repayments are a stretch for your budget

Updated October 2026. General information only; not financial, legal or tax advice.