If you have a credit score of 396, you are considered to have a below average credit rating. The average American consumer has a FICO credit score of 714, and anything below 580 is generally considered to be a poor credit score.
In this article, we’ll take a deeper dive into what your 396 credit score means, what loan products you’re likely to qualify for, and some steps you can take to improve your credit score.
What does an 396 credit score mean?
As mentioned, an 396 credit score is generally considered to be a poor credit rating. Depending on your other qualifications, such as income and employment, you may be able to qualify for certain types of loans (more on that in a bit). However, lenders tend to look at borrowers with poor credit scores as high-risk, and even if you can get approved, you’ll likely have to pay higher fees and interest rates relative to borrowers with higher credit scores.
Can I get a credit card with an 396 credit score?
We won’t sugar-coat it. With an 396 credit score, you’re unlikely to get approved for a traditional credit card. Credit cards are unsecured forms of debt, so banks tend to be a bit more cautious compared to loans backed by specific assets, like mortgages and auto loans.
Having said that, there are a couple of options. You can be added as an authorized user on someone else’s credit card. Alternatively, you can apply for a secured credit card. Secured credit cards work just like traditional credit cards, including regular credit reporting. The difference is that you’re typically required to make a deposit equal to your credit limit to “secure” the account.
Can I get an auto loan with an 396 credit score?
Of all the loan types listed here, auto loans are perhaps the easiest to get with a lower credit score. However, you can expect to pay substantially higher interest with a subprime credit score compared with the average borrower. As of November 2022, the average borrower with a 720 credit score or higher paid an APR of 5.64% on a 60-month new car loan, compared with an APR of 17.54% for someone in the 500-589 range. On a $40,000 new car loan, this translates to more than $14,000 in additional interest for the lower-credit borrower.
Can I get a mortgage with an 396 credit score?
It’s highly unlikely you’ll qualify for a conventional mortgage with your credit score. The lending standards of both Fannie Mae and Freddie Mac require a minimum credit score of 620, and even this level requires a strong debt-to-income ratio and a rather large down payment.
It is possible to qualify for an FHA loan with a credit score as low as 500, although you won’t get the standard 3.5% down payment these loans are known for. Borrowers without a FICO Score of at least 580 need to put 10% down. And if you have a credit score below 500, you’ll probably need to bring your score up to qualify for any type of mortgage.
Can I get a personal loan with an 396 credit score?
To be sure, most personal lenders want to see a credit score significantly higher than a 396, so you may have a challenge finding a lender willing to approve you. That said, some personal lenders and lending marketplace (including Upstart) specialize in loans for individuals without strong credit scores, so it could be worth applying. In fact, Upstart doesn’t have an official minimum credit score requirement in most states, and their model considers factors beyond credit score, such as your education¹, employment, and hundreds of other data points when evaluating an application.
Take your 396 credit score with a grain of salt
As mentioned, there is no universal definition of a “poor” credit score, and different lenders use credit scores to different extents. To be sure, if you have an extensive record of loan defaults, charge-offs, judgements, or a recent bankruptcy, you will likely have trouble getting loans until you improve your credit history.
Having said that, no single metric is a flawless predictor of consumer behavior. Upstart’s model looks beyond a borrower’s credit score by using over 1,000 data points to paint a more complete picture of their financial and life situation in order to give qualified borrowers who might have less-than-ideal credit scores the access to borrowing they need and deserve.
How can I improve my 396 credit score?
With a below-average credit score, it’s a smart idea to understand why your credit score is so low and focus on taking steps to improve it. While your credit score isn’t a perfect indicator, the reality is that your financial life can be much easier with an even modest improvement in your score.
With that in mind, here are some steps you can take to bring your credit score up. Building good credit takes time, but you can have a meaningful impact on a low credit score faster than you may think.
Assess the damage and check for errors
The first step is to check your credit reports. You should do this regularly if you have bad credit or not. Consumers are entitled to a free copy of their credit reports from each of the three major credit bureaus once a year, and you can request yours at annualcreditreport.com.
There are two things you need to do. First, check for errors. Over one-third of credit reports contain at least one error, and in many cases, these errors can adversely affect your score. Second, read through your credit report to determine why your score is low. Do you have missed payments? Charged-off accounts? Foreclosures? Judgements?
Do some damage control
Adverse information typically stays on your credit report for seven years. But that doesn’t mean you can’t do some credit repair to your bad credit score in the meantime. You might be surprised what you can accomplish.
For example, if you have a delinquent credit account, try calling your credit card company or the collection agency to see what can be done. It’s not uncommon for a creditor to agree to delete a negative item in exchange for payment in full. If you have late payments on your record, see if the creditor will stop reporting them after a certain number of on-time payments.
The point is that the worst thing they’ll say is “no.” And if they’re willing to work with you, it could have a positive impact on your credit score. And if you’re not comfortable making these calls yourself, there are some excellent non-profit credit counseling services that can help on your behalf and can also provide assistance with debt consolidation and budgeting.
Get a secured credit card
We briefly mentioned this earlier, but one of the most effective ways to establish or repair your credit is to start establishing a good payment history. And one way that’s available to just about all consumers (even with a low credit score) is a secured credit card. You’ll need to place a deposit equal to your card’s credit limit, but once you do, it works just like a standard credit card—including regular reporting of your payment history to each credit bureau. You might be surprised at the impact even a few months of responsible use of a secured credit card can have.