What your score means
A 400 credit score is considered a poor credit score by most lenders.
In fact, it’s considered a very poor score, considering that FICO scores range from 300 to 850. Chances are, if you have a score of 400, we’re not just talking thin credit or a couple slip-ups in the past. We’re probably talking a bankruptcy, or many recent delinquencies.
How your score compares
Here’s what various score ranges mean (based on definitions from Experian regarding FICO scores):
Credit-score ranges defined
|800+||Excellent||Consumers in this range can expect easy approval for credit products and the best terms.|
|740-799||Very good||Consumers in this range can expect to qualify for a wide range of products and are eligible to receive favorable terms.|
|670-739||Good||Consumers in this range may vary in their qualification for credit products. Those at the lower end may get denied for premium products, or may have less-favorable terms/lower credit limits. Still, getting approved for a card or loan is absolutely feasible.|
|580-669||Fair||Consumers in this range can expect higher interest rates and may not qualify for some credit products. Results will vary, based on whether the score is due to thin credit history or a troubled one (bankruptcies and late payments).|
|579 and lower||Poor||Consumers in this range will have trouble qualifying for most credit products.|
Your 400 score puts you in the bottom row. Simply put, lenders see you as a high risk for default.
What you’ll qualify for with a 400 score
Expect your options to be limited. You will likely be declined for most loans and, perhaps, even cards meant for those with bad credit. If you qualify for a card – and know you can treat it responsibly – consider these starting points:
- Cards you’re being offered in the mail: It may surprise you, but some credit-card issuers are eager to do business with those who have filed for bankruptcy. So check your mailbox. Many mailed offers are preapproved, meaning the bank has likely dug into your credit history and offered you a card anyway. These won’t be premium cards with rewards and low fees. But they’re a place to start.
You can also check for your preapproved offers using this tool:
- Secured cards: Browse these options. Secured cards may be easier to get than regular credit cards, because you’ll be required to put down a deposit first. Even so – you may get rejected for these products, if the bank doesn’t think you’ll make a good future customer.
- Get someone to add you as an authorized user: If you know a loved one with good credit, ask to be added to one of their credit cards as an authorized user. The account’s history will get reported to your own credit reports and possibly help fuel your score’s growth. However – even being an authorized user on a card with pristine history won’t “hide” a bankruptcy or delinquencies. Those will still weigh your score down – and will be noticed by any lender who pulls your credit reports.
More about credit scores
There are various scoring models out there, FICO being the most commonly used by lenders, VantageScore being the most commonly provided by free scoring sites. So, to create your credit-building road map, review the factors below. We’ve listed FICO’s scoring factors in order of priority (biggest to smallest):
- Payment history (35 percent of your FICO score): Ideally, payments are made on time and have always been. For whatever reason, your payment history isn’t great and, because this factor makes up more than a third of your score, your credit is suffering. So, keep your cards current, going forward.
- Utilization (30 percent of your FICO score): Scoring algorithms reward you for keeping the ratio of used credit to available credit as low as possible (below 30 percent, ideally lower). If you manage to get a new card, it will probably come with a low limit – so consider making just one small purchase a month to avoid getting anywhere near maxing out. If you still have older accounts with high balances, pay them down as low as you can.
- Length of credit history (15 percent of your FICO score): FICO’s algorithm rewards you for accounts that have been open a long time. If you can get a card and treat it responsibly, it will increasingly buoy your score, the older it gets.
- New credit (10 percent of your FICO score): Every time you apply for a new credit product, the resulting hard inquiry will temporarily ding your score. So, if you’re rejected for a card designed for bad credit, don’t go on an application spree; you probably won’t get approved for anything. Instead, try to get added as an authorized user, begin the long wait for your delinquencies/bankruptcy to move further into your past, and apply for another card after your score increases.
- Credit mix (10 percent of your FICO score): FICO (and lenders) want to see that you can manage a variety of credit types. Having both installment loans and revolving credit (ie, cards) on your report will help you maximize this factor. But this is the icing on the cake and probably not a factor you have the luxury of maximizing at this (low) point in your credit journey.