If you have an 646 credit score, you are generally considered a subprime consumer, but it won’t necessarily prevent you from borrowing money. The average FICO credit score in the United States is 714 as of 2021, and scores within the 580-669 range are considered to be “fair” credit.
In this article, we’ll take a look at what your 646 credit score means, how likely you are to qualify for specific types of loans, and what you can do to improve your credit score.
What does an 646 credit score mean?
As mentioned, credit scores within the 580-669 range are considered to be fair credit. While your credit score is below average, it isn’t in the realm of “bad credit” and shouldn’t necessarily prevent you from getting certain types of loans.
With your 646 credit score, lenders will generally consider you to be a higher-risk borrower. This means to get loan approval, you’re likely to need strong qualifications when it comes to income, employment, and other debts. And you’re likely to get relatively high interest rates on loans when compared to borrowers with excellent credit scores.
Can I get a credit card with an 646 credit score?
With a 646 credit score, you might be able to get a traditional credit card. While most credit card issuers don’t publish minimum credit scoring standards, some will approve applicants in the fair credit range. You’re unlikely to get approved for the best credit card offers, but you might be able to get a basic credit card or store credit card with your score.
If you can’t qualify for a credit card (or one with decent benefits), 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 open an account.
Can I get an auto loan with an 646 credit score?
The short answer is yes, but you’re likely to get a significantly higher-than-average interest rate. To put it into perspective, as of November 2022, the typical borrower with prime credit (720 or higher FICO score) got an APR of 5.34% on a 60-month new auto loan. With a score in the 620-659 credit score range, the average APR was 11.76%. And with a score of 590-619, the average rate was 15.92%.
It’s also worth mentioning that interest rates can vary significantly among lenders, even for borrowers with the exact same credit score. And this is especially true for borrowers in the subprime credit tiers (below-average credit scores).
So, if you’re buying a home or car, it’s important to shop around for the best loan terms. In fact, the FICO model is designed to encourage rate shopping. Any credit inquiries for the same type of loan in a short period (usually two weeks) will count as a single inquiry for scoring purposes. Therefore, it doesn’t hurt your credit score to apply at multiple lenders or lending platforms, especially those like Upstart that consider far more than just applicants’ credit scores.
Can I get a mortgage with an 646 credit score?
Yes, your 646 credit score can qualify you for a mortgage. And you have a couple of main options.
With a credit score of 580 or higher, you can qualify for an FHA loan to buy a home with a down payment of just 3.5%. These loans are guaranteed by the Federal Housing Administration and have their downsides (such as mandatory FHA mortgage insurance), but can be a great option for those who want to become homeowners.
To get a conventional mortgage, the minimum credit score requirement is 620 per Fannie Mae’s lending standards. However, a credit score on the lower end of the spectrum comes with certain caveats. For example, to get a conventional loan with a 620, you’ll need a maximum debt-to-income ratio of 36% and be prepared to make a 25% down payment. You can get a conventional loan with 5% down (or even 3% in some cases), but the minimum credit score required for this is 660 according to the latest Fannie Mae underwriting standards.
Can I get a personal loan with an 646 credit score?
You aren’t likely to get a lender’s best rates on a personal loan without a good credit score, but a FICO score of 646 should allow you to qualify for one. This is especially true when it comes to personal lending marketplace like Upstart that specialize in loans for consumers with less-than-perfect credit histories.
It’s also important to emphasize that your credit score is only one component of loan approval. You’ll also need income to justify the loan, as well as an acceptable level of indebtedness. In fact, borrowers with top-notch credit scores get rejected for loans often if they already have too much outstanding debt.
Take your 646 credit score with a big grain of salt
As mentioned, there is no universal definition of a “fair” credit score, and different lenders use credit scores to different extents. No single metric is a flawless predictor of consumer behavior. In fact, a 2021 study by professors at the University of Pittsburgh found that traditional credit scoring misclassified default risk for about 30% of consumers, especially lower-income and younger consumers.
Upstart in particular aims to look 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 646 credit score?
Although you have a fair credit score and should be able to qualify for loans in many cases, it is certainly easier to borrow money with good credit. Plus, a higher credit score can save you money on interest, and could even make it easier to rent an apartment or get a job.
With that in mind, here are some steps you can take to boost your fair credit score and set yourself on the path to good, or even great credit in the future.
Assess the damage and check for errors
First of all, your credit score is just a number. To figure out why your credit score is below average, you’ll need to check your credit reports. You can get a free copy of your credit reports from the three major credit bureaus every year at annualcreditreport.com.
Once you have your credit reports, there are two things you should do. First—check for errors. Incorrect information is a silly reason to have a below-average credit score, so if you find information that is inaccurate or outdated, this should be the first move. Second, read through your credit report and make a note of any negative information. This can mean late payments, delinquent accounts, charge-offs, collection accounts, judgements, foreclosures, etc.
Do some damage control
Adverse information typically stays on your credit report for seven years, and if your score is in the fair credit range, you probably don’t have too much of it. But you might be surprised what you can accomplish with a little damage control.
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, or to stop reporting late payments if you explain a financial hardship and promptly bring the account current.
Think of it this way. The worst thing they’ll say is “no.” And if they’re willing to work with you (because after all, they want your money), it could have a sharp positive impact on your credit score.
Use your credit
Did you know that your “credit mix” makes up 10% of your FICO score? This means that if you have a variety of different account types (say, a mortgage, auto loan, and credit card), it can help your score? Plus, by using your credit and showing responsible behavior, you can establish a good payment history and favorable debt utilization, both of which are key credit scoring factors.
Now, we’re not saying to go borrow money just to improve your credit score. But you can take steps like applying for a credit card (or secured credit card) if you don’t have one already. Use it for a few purchases you were going to make anyway, and then pay the entire bill by the due date.