A credit score of 390 is a bad credit score among most lenders across the United States of America. They categorize it within the ‘poor’ credit rating bracket, which ranges from 300 to 579 using the FICO scoring system. This means that a person has been associated with severely delinquent accounts, collections, bankruptcies, or any other negative items that severely influence his/her credit status.
Credit card applications are practically impossible to get approved for a person with a 390 FICO score, let alone get approval for a mortgage or an auto loan from a conventional lending company. It is a well-known fact that few lenders are willing to provide loans to people with a credit score as low as this one.
In this article, let me share how credit score restrains lending decisions and how a 390 credit score affects the choices that are made.
Credit managers and lenders regard a credit score of 390 as a virtually guarantee of failure to meet debt commitments or payments. FICO scoring model analysis of the data of its borrowers reveals that those with scores of less than or around 300 have defaulted at a rate of 20-25% or 1 in 5. Which is astronomically higher than borrowers in higher score ranges, and suggests that those people are not as creditworthy as they are portrayed to be.
Accordingly, obtaining unsecured credit such as credit cards, personal credit, or signature credit – that is, loans that do not require collateral – can, in a way, be ruled out by most lenders if your score is 390. These guarantees almost always come with the proviso that they will never be called, and, accordingly, approvals are very rare indeed. Secured forms of credit such as car loans would not be approved to begin with or if approved, would be at exorbitant interest rates.
Similarly, a mortgage would be out of the picture with such a score in the mid-300s. The FICO score required to qualify for a conventional mortgage according to Fannie Mae is 620. Mortgage loans with FHA approval are welcomed with scores from 500 and the borrower is expected to pay 10% of the cost of the house, but 390 is low for most lenders. For most businesses and industries, 390 is simply too large a risk for lenders on a large, long-term product such as a mortgage, unless there are exceptional circumstances.
Credit Offers That You Can Qualify with a 390 Credit Score
With such a low credit score, mainstream credit options are extremely limited, but there may be few lenders who are considered to be higher risk. These include:
- Subprime auto loans: It is important to note that specialty “Buy Here Pay Here” dealers mainly target credit-challenged borrowers. However, interest rates normally begin above the 15% mark, even on secured auto loan categories.
- Payday/title loans: These are short-term micro-loans that require the borrower to provide a post-dated check or even car title but carry interest rates higher than 400 percent of the Annual Percentage Rate. They should only be employed where the use of other logistics options is impossible, and costs are astronomically prohibitive.
- Cosigned loans: Getting a good credit-qualified cosigner could mean securing other cheaper varieties of SIL or credit cards to rebuild the credit. However, the cosigner takes liability towards repayment in case you fail to make the necessary payments.
- Credit builder loans/secured cards: These entail an initial down payment which acts as the credit limit and security for the advance in case of nonpayment. They are made available strictly for those with poor credit score histories to help borrowers change negative habits and payment records.
- Non-traditional online lenders: While companies like LendingClub, Prosper, and Upstart rely on alt-data for underwriting, individuals with lower FICO scores, who may not be eligible for personal loans or other credit products, may receive them. Although these lenders may offer competitive interest rates, borrowers with low FICO scores may still find the cost of borrowing steep.
The Ways to Raise a 390 Credit Score
Fortunately, highly noticeable and quite rapid gains are possible after one has started at a baseline of 390. may take a few years to get over 740 which is regarded as a good credit score but by consistently following some of the best practice credit maintenance habits, one could get to the fair average credit range within 12-18 months.
Following are some general guidelines for increasing credit from 390:
- Always pay all established or new credit accounts, down to the last cent, and make sure that the due dates are not missed even by a single day. Credit repayments are also given the most consideration in credit scores and one payment missed can cause a huge loss.
- Keep the balances that are owed below 30 percent on all the revolving credit lines such as credit cards. This helps to avoid charging up to the maximum, which lowers the credit utilization ratio, the second most important factor for credit score calculation.
- Do not apply for new credits within the next several months, as this will cause extra hard inquiries to appear on the credit report. However, assuming that acquiring a new credit builder product or a secured card appropriately could equally work to rebuild favorable payment records. Just pay as you agree and as often as you agreed to – do not delay your payments and do not make partial payments.
- Some analysts, therefore, suggest that negative information should drop off reports and grow old. Negative marks generally stay for 7 years at max and the marks decrease as a result of time. It also differs with new accounts and inquiries where older ones contribute to the score calculation less than the new ones in FICO models.
- Some also submit disputes on inaccurate negative items. At times, some of them can be wiped out which assists in increasing the scores faster. Ensure collectors confirm that debts being reported fit the category and are properly computed or request for them to be removed.
- Request the free annual credit reports and make it a practice to review all the credit reports from the three major bureaus for any inconsistencies. Challenge discrepancies with the lenders and credit bureaus in writing too. This means that it is crucial to ensure that your credit report is free of error and is updated to get the most out of the score as the negative items get removed.
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