By CreditNinja Reviewed by Matt Mayerle
Modified on May 15, 2024

A 400 credit score is a poor credit score, falling in the lowest credit score range. When you have this credit score, navigating your finances can be a little challenging. This can be frustrating and inconvenient, especially when trying to borrow money with a loan or credit card or reach certain milestones like finishing school or buying a home. 

The good news is that a 400 credit score can be improved! Once you do move up with credit scores, finances should be much smoother. Keep reading to learn more about a 400 credit score and ways that you can improve it. 

Key Takeaways for a 400 Credit Score

Overview of Your
Credit Rating

A 400 credit score falls within the lowest credit score range. It is a very poor credit score; improvement should be a priority.

Borrowing Options With a
400 Credit Score

A 400 credit score will limit your borrowing options to bad credit loans. A cosigner may be necessary for other loan options.

Improving a 400
Credit/FICO Score

Actions like paying your bills on time, keeping your credit utilization low, and building your credit mix are just some ways to help your credit.

Is a 400 Credit Score Good?

A credit score of 400 is not considered good; it falls within the poor credit category. When you are in this credit range, improving your credit score should be a priority because credit can impact several aspects of your life. A better credit score will make things much easier for you!

What Can You Get Approved for With a 400 Credit Score?

You won’t have many options with a 400 credit score; bad credit loans may be your only choice. However, there are some things you can do to help you improve your chances of approval with other loan options:

 

Strategy

Description

Adding a cosigner

Adding a cosigner provides the lender with additional security if the primary borrower fails to make payments, thereby increasing the chances of approval.

Adding a co-borrower

Similar to a cosigner, a co-borrower shares equal responsibility for the loan, enhancing approval chances as both credit profiles are considered.

Looking at secured loan options

Secured loans involve collateral (such as property or a vehicle), offering more assurance to the lender and often making approval easier.

Increasing your down payment

A larger down payment decreases the amount borrowed, reducing the lender’s risk and potentially increasing the likelihood of loan approval.

Personal Loans

Personal loans are unsecured loans that are some of the most popular loan choices for borrowers. Because of their popularity, many lenders offer these loans. So you’ll be able to find a personal loan at most banks, credit unions, and private lenders (online and in person). With bad credit, private lenders may be the more flexible choice. 

Bank Loans

Bank loans are any loan that comes from a bank. These can be long-term or short-term loans with different uses. Banks, credit unions, and similar institutions usually have pretty strict credit requirements, so you will likely need a cosigner or co-borrower for a bank loan.

Credit Cards

Credit cards are a form of revolving credit, and they are usually the first kind of credit account that most Americans have access to. Small credit limit credit cards may be available to poor credit borrowers. 

Car Loans

A car loan, also referred to as an auto loan, helps borrowers finance the cost of purchasing a new or used car. With these loans, there is usually a down payment requirement, which can be extremely helpful when you have poor credit. You can increase your chances of approval by providing a larger down payment. Here are some auto loans that may be available for very bad credit:

  • Prestige Financial auto loans
  • Autopay auto loans
  • Auto loans from Digital Federal Credit Union
  • Carvana
  • Capital One Auto Finance
  • Credit Acceptance Corp. auto loans
  • MyAutoLoan

 

Products To Help Improve a 400 Credit Score

Improving your 400 credit score is possible, and you don’t have to go about it alone! Here are some products that can help you improve your credit and get a good credit score:

Credit Builder Loan Options

Credit builder loans can be an extremely helpful tool for your credit, specifically through payment history. With these, you won’t get the money upfront. Instead, the funds will be put aside in a savings account. You’ll make your monthly payments to your lender, which should be reported to all three credit reporting agencies. If you make on-time payments, you can build a positive credit history! Here are some popular places for credit builder loans:

  • Credit Karma — Known for no interest.
  • Credit Strong — Offer longer repayment terms than others.
  • Digital Federal Credit Union — One choice if you want to stick with a credit union. 
  • MoneyLion — Good option for small loan amounts.
  • Self — Offer high loan amounts.

A secured credit card works similarly to a credit builder loan. However, with a secured credit card, you’ll have a revolving line of credit. Secured credit cards can usually be found with the same kind of lenders as credit builder loans. 

A Budget/Focused Financial Plan

A budget is a great way to track your spending and income. From here, you can see what your financial habits are and work on them. If you already have a budget, you can hone in on one aspect of it that will help your credit. For example, if you find yourself missing several monthly payments, you can work on that. Or, if you have a lot of debt, then you may want to focus on a debt management plan. 

Alternative Payment Reporting

There are lots of payments that many people make every month in a timely manner, which are not reported to the credit bureaus. There are services that can help you report your alternative payments, such as your utility bills, rent payments, phone bills, and more. This can really help you establish a payment history, which is usually done through traditional credit accounts

Benefits of Improving Your 400 Credit Score

You’ll find several benefits that come with improving poor credit scores; we will go over some of them:

Lower Borrowing Costs

The most apparent benefit of improving your credit score is lower borrowing costs. Even going into the fair credit score category will mean saving on interest and loan costs. Once you do get to a great credit score, you’ll see an even bigger difference! 

More Loan and Credit Card Options

With a better credit score, you can look forward to more loan and credit card choices. Why would this be helpful? Well, it can help you with personalization. Not all lenders are the same, and some may offer different terms than others. By having several options to choose from, you can find the best fit for you. And overall, you’ll have access to lenders who offer lower interest rates and borrowing costs.

Lower Insurance Costs

Another benefit you may not be aware of is that you could save on insurance rates, specifically auto and home insurance. This works because insurance lenders factor in credit scores when assessing risk. Just like with lenders, a higher score correlates with less risk, which means lower costs for the customer. 

How To Improve Your 400 Credit Score

There are several things you can do to improve your 400 credit score; here are some tips:

Avoid Late or Missed Payments 

One of the most harmful things you can do to your credit is to have a late or missed payment. These payments can remain on your credit reports for up to seven years! Because payment history is the most significant factor in determining your credit scores, it will be extremely detrimental. Set up things like automatic payments or reminders to avoid missed payments! 

Keep Your Debt Low 

Debt can impact so many aspects of your finances, as well as several factors that make up your credit score, such as your credit utilization and credit mix. Many Americans do struggle with debt, specifically credit card debt. In fact, according to the 2022 data from the Federal Reserve Bank of New York, the average credit card debt for households was $7,951.¹ When you are in this stage of credit, you’ll want to keep debt as low as possible, both credit card accounts and loans. Once you get to a really good place, then you can start focusing on things like your credit mix. 

Avoid Several Hard Credit Inquiries

Hard credit checks (checks that are done for credit approval), when done several times in a short period, can be harmful to your credit. So, try to avoid these if possible. This goes hand in hand with keeping your debt low!

FAQs About 400 Credit Scores

The FICO credit scoring system is a method used to calculate credit scores based on several credit-related factors, including payment history and credit utilization.

To monitor and understand your credit history, you can request your credit report annually for free from each of the three national credit bureaus—Equifax, Experian, and TransUnion.

Increasing your credit limit typically requires a fair to good credit score. Lenders evaluate your average credit score and credit history to decide if you qualify for a higher limit.

Yes, opening multiple accounts can affect your credit report. It influences your credit mix and credit utilization, which are key factors in determining your credit scores.

Removing incorrect or outdated negative items from your credit report can improve your credit scores. Regularly review your credit history for any discrepancies.

Applying for new credit accounts (with a credit card company or a loan lender) often leads to a temporary drop in credit because lenders record hard inquiries in your credit report.

Credit bureaus update credit reports regularly as they receive new information from creditors. This can affect your credit scores as your credit history changes.

What Interest Rate Can I Get With a 400 Credit Score?

Unfortunately, interest rates with a 400 credit score will be in the highest range. The relationship between interest and credit scores will look like this: the higher a borrower’s credit score, the lower the interest rate, and vice versa. So, once you start working on improving your credit, you should see a change in the interest rates that you are offered. 

Can I Buy a House With a 400 Credit Score?

Generally speaking, a 400 credit score will not qualify you for a conventional mortgage. Lenders may want borrowers to have a higher credit score than 400 for most mortgage types. This is because mortgages are extremely long-term and offer large loan amounts, adding lots of risk for the lender. Even good credit borrowers have to have a long-established credit history to be approved for this kind of financing. 

Top 5 Resources for a 400 Credit Score

Related Credit Scores

315  350  370  380  399  430  440  450  460  480

References:

  1. Americans have more credit card debt than savings again in 2024 | USA Today
  2. 7 car loans for bad credit in 2024 | Credit Karma
  3. Best Credit Builder Loans of 2024 | Investopedia