A 396 credit score is significantly below the average in the U.S. According to FICO, this score falls within the "Poor" range, which is from 300 to 579. With a 396 credit score, lenders likely won't accept your loan application, and if they do, you'll probably have to pay much higher interest rates or extra fees as a result. However, as you will see below, you still have options.
Is there a way to increase your score to avoid these extra fees and higher rates? While it's not an overnight process, there are several steps you can take to improve your credit score and rise above a "Poor" rating. Keep reading to learn what goes into a credit score, what a 396 score means for your financing options, and how you can increase your score over time.
What affects your credit score?
Before we get into what this credit score means for you and your finances, let's take a brief look at what credit scores actually are. Your credit score is broken into a few different categories, each of which contributes to the total score.
- Payment history. Your payment history has the biggest effect on your credit score and is exactly what it says: a history of your bill and credit payments. This tracks the number of on-time payments you make, whether on loans or credit card accounts.
- Amounts owed. This refers to how much available credit you have compared to how much credit you owe. You can also think of this as your credit utilization ratio, which should ideally be kept below 30%. For instance, if you've reached the credit limit on numerous credit cards, this will likely lower your score.
- Length of credit history. How long you keep a credit account open matters, even if you don't actively use that credit line. This factor considers the age of your oldest and newest credit accounts as well as the average age of all your accounts together.
- Credit mix. While it may sound counterproductive to have multiple credit accounts, a mix of different accounts is actually a good thing. Having a couple of credit cards, an auto loan, and a mortgage shows lenders that you can manage several types of credit responsibly.
- New credit. "New" credit specifically looks at how many credit accounts you opened recently and the number of credit inquiries made into your account. Each time you apply for a new loan or line of credit, the lender will make an inquiry into your credit history to review your score and payment history.
What does it mean to have a 396 credit score?A 396 credit score is significantly below the average credit score. Though a small percentage of Americans have credit scores below 579, Experian found that these borrowers were significantly more likely to become "seriously delinquent," or more than 90 days late on a bill or debt payment. With this in mind, it makes sense that lenders would be hesitant to offer financing to an applicant with a 396 credit score.
|Credit score range||% of consumers||Delinquency rate|
How you reached this score isn't quite as clear. Maybe you made several late payments in the past in addition to reaching your credit limit on multiple lines of credit and having your car repossessed. If you recently had to declare bankruptcy, this could also drop your credit score substantially.
How does this score compare to others?
Unfortunately, as we mentioned above, a 396 credit score isn't great. You'll likely have a difficult time getting an auto loan or unsecured credit card, and you won't have access to a high credit limit on a secured credit card either. And as you can see from the data below, the average credit score is only increasing with time.
The table below links to in-depth articles for all credit scores.
What does a 396 credit score get you?
Even though a 396 credit score is considered "Poor," you'll still have some financing options available to you, as you can see below.
|Type of credit||Qualify?|
|Secured credit card||Yes|
|Unsecured credit card||Maybe|
|Best rewards credit card||No|
|0% APR credit card||No|
|Home loan||Yes (VA and FHA)|
As you can see, your best bet when applying for loans or credit lines with a 396 credit score will be secured lines of credit. These could be secured credit cards — where you must provide a security deposit — or secured personal loans, which are secured by an asset. With secured loans or credit lines, the lender has funds or an asset that can then be sold to cover your overdue payment, which reduces the lender's risk.
Popular credit cards for a 396 credit score
Most of the best credit cards to apply for with a 396 credit score are secured cards, such as the Capital One Platinum secured credit card. Not only does this card not have an annual fee, but it also has one of the lowest security deposits among secured cards.
However, the above card isn't the only one available to applicants with low credit scores. Take a look at the credit cards below, each of which accepts a 396 credit score, and compare which option is the best for you.
What are the best personal loan options for someone with a 396 credit score?
Just as with credit cards, the most popular personal loans for consumers with scores around 396 will mostly be secured personal loans. While these aren't the only personal loans available, they'll probably offer applicants with low credit scores the best loan terms.
Auto loans with a 396 credit score
Unfortunately, very few auto loans were provided to consumers with credit scores below 540. Instead of applying for a car loan and receiving poor terms, you may be better off saving up and improving your credit score before applying for auto loans. As you can see from the table below, a higher credit score can save you hundreds of dollars over the life of the loan.
|Credit score||APR||Monthly payment||Total interest paid|
|720 - 850||6.511%||$237||$1,386|
|690 - 719||7.744%||$243||$1,661|
|660 - 689||9.573%||$252||$2,076|
|620 - 659||10.739%||$257||$2,345|
|590 - 619||15.055%||$279||$3,372|
|500 - 589||16.484%||$286||$3,723|
|*Rates above for a $10,000 48-month used auto loan.|
That being said, the auto loan lenders below have previously accepted applicants with a 396 credit score.
Mortgages and home loans with a 396 credit score
Consumers with credit scores below 620 typically make up a small percentage of successful mortgage applicants. This means mortgage lenders may refuse to work with applicants that have credit scores around 396.
By creating a savings plan and improving your credit score first, you may receive better financing down the line. For example, if you get your credit score to 580, you'll qualify for a lower down payment requirement through the Federal Housing Administration (from a 10% to a 3.5% down payment). Just as a higher score saves you money in auto loan interest rates, improving your credit score can save you even more money on a mortgage.
|Credit score||APR||Monthly payment||Total interest paid|
|760 - 850||6.129%||$304||$59,416|
|700 - 759||6.351%||$311||$62,014|
|680 - 699||6.528%||$317||$64,104|
|660 - 679||6.742%||$324||$66,652|
|640 - 659||7.172%||$338||$71,841|
|620 - 639||7.718%||$357||$78,556|
|*Rates above for a $50,000 30-year fixed rate mortgage.|
However, there are still mortgage lenders who will accept applicants with a 396 credit score. For instance, the U.S. Department of Veterans Affairs does not have minimum credit score requirements, so you may receive home financing through a VA loan.
Student loans with a 396 credit score
Fortunately, student loans are some of the easiest loans to receive with a credit score of 396. Since most students are still building credit at this time, it makes sense that student loans would have less strict credit requirements. In fact, federal student loans generally don't have credit requirements at all.
However, private student loan lenders usually have more stringent requirements and typically won't accept an applicant with a 396 credit score. Because of this, your chances will be much better if you have a cosigner.
How to improve a 396 credit score
With all of this in mind, there is a silver lining. If you have bad credit, it is easier and faster to improve your score substantially because of the way credit score algorithms are set up.
Catch up on past-due payments
We know it's easier said than done, but repaying your old bills and debts can help improve your credit score. This is especially true when it comes to the most recent versions of FICO and VantageScore credit scores. Newer credit scoring models ignore collections that have a zero balance. So, if you pay or settle a collection and it's updated to reflect the zero balance on your credit reports, your FICO® 9 and VantageScore 3.0 and 4.0 scores may improve. However, scores generated by older models that do not ignore zero-balance accounts will not improve.
However, it can be tricky to know how to best tackle your debts when you first start out. Luckily, you have a few options available to you:
- Do it yourself. This is the most obvious plan. Using a calendar, day planner, or money management tool, start budgeting and tracking your payments regularly. It won't be easy, but by creating a solid repayment strategy you can chip away at your debts and lower your credit utilization ratio. You should also consider which debt repayment strategy is right for you before starting.
- Apply for a debt consolidation loan. If you have multiple debts to pay off, consolidating your debts into one payment can make repayment easier to track and manage. While you may have to search for a secured loan with a 396 credit score, consolidating your debts can help debt payments feel more manageable.
- Consult a debt settlement company. If your debts seem too large to tackle, talking to a debt settlement company may help you reduce your debts to something more doable. While they won't pay your debts for you, a debt settlement company can help reduce the amount you owe to a particular creditor.
Review your credit reports for errors
Sometimes, a poor credit score isn't your fault. Though we'd all like to believe mistakes won't be made when it comes to our credit, there's always a chance you could have an error on your credit report. It could be the result of fraud, where your information was stolen and used to open a credit line or loan, or a simple mistake by the major credit bureaus.
Regardless of what happened, make sure to regularly review your credit report for any errors. If you don't have the time to monitor your credit score yourself, consider hiring a credit repair company instead. Their job is to review your credit history and report any false information on your behalf, which could end up improving your score.
Be patient after a foreclosure or repossession
After a foreclosure or repossession, you may feel like you need to work quickly to better your credit score. The reality is that a foreclosure or repossession typically happens after multiple missed payments and attempts to collect those payments. Because of those attempts, a foreclosure won't be the only bad mark on your credit report. And once a repossession is part of your credit history, you'll likely see your score drop significantly, often 100 or more points.
What does this mean for you? Patience. Instead of scrambling to repay every debt you have and anxiously monitoring your score, understand that repairing poor credit doesn't happen overnight. It may take several months or years to return your credit score to its previous glory. On top of that, repossession may stay on your credit report for up to seven years.
That doesn't mean stop trying, but rather be patient and take small steps towards your debt repayment goal. If you're not sure where to start, read this guide. You can also reach out to a certified financial planner or a credit counseling company. They can help you budget and create a debt repayment strategy that works with your finances.
Open a secured credit card account
One way to show your creditworthiness is through a secured credit card. To use a secured credit card, you first have to pay a security deposit, which the card issuer holds onto. If you ever miss a card payment, the card issuer uses the security deposit towards your balance.
This can be a great way to improve your credit score and manage credit card debt more effectively. Take a look at some of the secured credit cards below and compare card features to find the best one for your spending habits.
What is the difference between FICO credit scores, VantageScore, and PLUS?
FICO and VantageScore are the two most popular credit scoring models in the United States. They are both used by lenders to assess your creditworthiness, and they both have a range of 300 to 850, with higher scores indicating better credit.
Here are some of the key differences between FICO and VantageScore:
- FICO scores are more widely used by lenders. About 90% of lenders use FICO scores, while only about 60% use VantageScore. FICO scores are more complex than VantageScore. FICO scores use a variety of factors to calculate your score, including your payment history, credit utilization, length of credit history, and recent inquiries. VantageScore uses a simpler model that focuses on your payment history and credit utilization.
- Also, VantageScore scores are more forgiving of recent inquiries. VantageScore counts multiple inquiries, even for different types of loans, within a 14-day period as a single inquiry. FICO scores only dedupe multiple inquiries from student loan, auto loan, and mortgage applications.
- PLUS is a newer credit scoring model that is still gaining traction. It is designed to be more transparent than FICO and VantageScore, and it uses a variety of factors to calculate your score, including your payment history, credit utilization, length of credit history, and credit mix.
Here is a table that summarizes the key differences between FICO, VantageScore, and PLUS:
|Range||300 to 850||300 to 850||250 to 900|
|Popularity||Most widely used||Less widely used||Newer model|
|Complexity||More complex||Simpler model||More transparent|
|Inquiries||Multiple inquiries within a 14-day period count as a single inquiry||Multiple inquiries within a 14-day period count as multiple inquiries||Multiple inquiries within a 14-day period count as a single inquiry|
|Factors used||Payment history, credit utilization, length of credit history, and recent inquiries||Payment history, credit utilization, length of credit history||Payment history, credit utilization, length of credit history, and credit mix|
Can you get approved with a 396 credit score?
There's a chance you could be approved for a credit card or loan with a 396 credit score. However, you may be subject to higher interest rates or poor loan terms with this score. Instead, try applying for a secured credit card or secured personal loan.
How can I raise my credit score from 396 to 700?
While you can raise your score from 396 to 700, keep in mind that this will take some time to do so. You can help increase your score by making timely payments, regularly reviewing your credit reports, and effectively using a secured credit card.
What credit score do you start with?
There technically isn't a "starting" credit score, at least not one that everyone starts with. If you haven't ever applied for a loan or credit card, you won't have a credit score at all. Once you apply for your first loan or card, the three major credit bureaus will begin building a credit file based on how you manage your account.
What is the lowest credit score?
Technically, the lowest credit score possible is 300, but you'll only have this score if you manage your finances extremely poorly.
- A 396 credit score is considered "Poor" by FICO score standards and represents around 16% of Americans.
- The most influential factor when calculating a credit score is the consumer's payment history.
- To improve your score, try paying down current debts, reviewing your credit report, or applying for secured cards or personal loans.
- Applicants with a 396 credit score may have a difficult time receiving a mortgage or car loan.
- Repairing your credit score doesn't happen overnight. It may take months or years to raise your credit score from 396 to 700 or above.
View Article Sources
- Credit Reports and Scores — USA.gov
- CFPB to Supervise Credit Reporting — Consumer Financial Protection Bureau
- Credit Reporting — Office of the Comptroller of the Currency
- My debt is several years old. Can debt collectors still collect? — Consumer Financial Protection Bureau
- How to Improve Your Credit Score — SuperMoney
- Top 10 Factors That Affect Your Credit Score — SuperMoney
- Do Medical Bills Appear On Your Credit Reports? — SuperMoney
- What is the Quickest Way to Fix Your Credit Score? — SuperMoney
- How to Illegally Change Your Credit Score (And Why You Shouldn't Try) — SuperMoney
- How Long Does it Take to Improve Your Credit Score? — SuperMoney
- How to Raise Your Credit Score by 100 Points — SuperMoney
- Do Personal Loans Build Credit? — SuperMoney
- What is Considered a Good Credit Score? 5 Major Factors That Determine Your Score — SuperMoney
- How Many Credit Bureaus Are There in the United States? If You Answered 3, Try Again — SuperMoney
- Best Credit Repair Companies — SuperMoney
Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.