Is a 398 credit score bad? Loans, cards & rates explained

A 398 score sits at the bottom of the 300‑850 FICO/Vantage range, signaling severe credit distress and a history of missed or defaulted payments. It tells lenders you have very limited repayment reliability, but it isn't a permanent label - credit scores can move with new behavior.

Because 398 is far below the 'fair' (580‑669) and 'good' (670‑739) benchmarks, most traditional banks will treat you as high‑risk and either decline applications or offer terms that include very high interest rates and strict conditions. Verify any offers carefully, as terms can vary widely by lender and state regulations.

398 credit score is generally considered a very poor or high‑risk rating. Most lenders place it in the 'bad' bracket, which means you'll face stricter approval standards and higher costs.

The reason it's labeled 'very poor' is that the score sits well below the typical 'fair' range (around 580‑669). Lenders see scores that low as an indication of past payment problems or limited credit history, so they often require larger down payments, charge higher interest rates, or deny credit altogether. However, some niche products - like secured cards or subprime loans - may still be available, though they come with higher fees and tighter terms. Always verify the specific criteria of any offer before applying.

Lenders label a 398 score as high risk because it signals a pattern of credit problems that could lead future losses. While each lender weighs factors slightly differently, the core concerns are fairly consistent.

• **Recent missed or late payments** - multiple 30‑day+ delinquencies suggest difficulty meeting obligations.
• **Defaulted loans or charged‑off accounts** - a history of accounts that never recovered signals a higher probability of repeat default.
• **Collections and public records** - collections, tax liens, or bankruptcies indicate severe past financial distress.
• **Thin or inactive credit file** - very few open accounts give lenders little data to assess repayment behavior, which they often treat as risky.
• **High credit utilization on existing accounts** - using most of the available limit shows reliance on credit and limited repayment cushion.

Because these signals collectively raise the chance that a borrower will miss future payments, underwriters typically respond with stricter approval criteria, higher interest rates, lower credit limits, or outright denial. This risk assessment directly shapes the loan and card options discussed in the following sections. Always verify specific lender requirements and terms before applying.

At a 398 score you'll typically see APRs that sit well above the prime rate and can vary widely by lender, loan type, and whether you have collateral. In other words, expect high‑risk pricing that can double or even triple what borrowers with good credit pay.

• **Personal loans:** Often start in the low‑30% range (example, assumes 32% APR on a $5,000 loan) and climb higher if the lender views you as very risky.
• **Auto loans:** May be offered at rates 10‑15 points above the average auto‑loan APR for fair credit; unsecured options can be substantially higher.
• **Secured loans (home equity, title loans):** Generally cheaper than unsecured products but still usually sit several percentage points above rates offered to prime borrowers.
• **Credit cards:** High‑risk cards often carry APRs of 25% + and may include annual fees; some issuers limit credit lines to a few hundred dollars.

Rate drivers include your debt‑to‑income ratio, recent payment history, and whether you can provide collateral. Always ask for the exact APR, any variable‑rate clauses, and compare multiple offers before signing. Check each lender's disclosures to confirm how rates may change over time.

You can still qualify for a few loan types with a 398 credit score, but approval, interest rates, and credit limits will hinge on your income, any collateral you can offer, and each lender's risk policies.

• **Secured personal loans** - Backed by an asset such as a vehicle or savings account; lenders may be more willing to approve because the collateral reduces their loss risk. Expect higher fees and lower loan amounts than with good‑credit offers.
• **Payday‑style installment loans** - Short‑term loans (often 2 - 12 weeks) that some lenders market to very low scores. These carry very high interest and may require proof of steady paycheck; use only as a last resort.
• **Title‑loan or auto‑title loan** - Uses your vehicle's title as security. Approval is possible despite a low score, but you risk losing the car if you miss payments.
• **Credit‑builder loans** - Offered by community banks or credit unions to help rebuild credit; the borrowed amount is held in a vault and released to you after you've repaid it, then reported to bureaus.
• **Home equity line of credit (HELOC) or second mortgage** - If you own substantial equity and have sufficient income, some lenders will consider you despite the score, treating the property as collateral.
• **Co‑signer or guarantor loans** - A loan where a person with stronger credit backs your application; the lender relies on the co‑signer's credit rather than yours.

Before applying, verify your ability to meet any income documentation requirements, confirm that the lender reports payments to all three major credit bureaus, and read the full terms so you understand fees and repayment schedules. High‑risk borrowing can quickly erode finances if you're not fully prepared.

With a 398 score you're limited to secured cards, sub‑prime (high‑risk) cards, and a few very basic credit‑builder products; most mainstream unsecured cards will be out of reach.

• Secured credit cards - require a cash deposit that usually equals your credit limit. They report to the major bureaus, so timely payments can help lift your score, but the deposit ties up money you could otherwise use elsewhere.
• Sub‑prime or high‑risk cards - un‑secured but marketed to low‑score consumers. They often come with higher fees, lower limits, and steeper interest rates; some may still demand a modest security deposit despite being called 'unsecured.'
• Credit‑builder or store‑specific cards - offered by retailers or fintechs as a way to start building credit. Limits are typically low, rewards minimal, and terms can vary widely; verify fees and reporting practices before applying.

Pick the secured option if you have cash for a deposit and want the cleanest path to improve your score; consider sub‑prime only after comparing all fee disclosures and confirming the card reports to all three major bureaus. Always read the cardholder agreement carefully before committing.

Your score can start climbing right away if you focus on the right levers - paying down debt, cleaning up your report, and building positive history, though improvements will take time.

1. **Pay down revolving balances to below 30% of each limit** - High utilization hurts your score the most; reducing it shows lenders you're not over‑leveraged.
2. **Dispute any inaccurate items on your credit report** - Errors like wrong late‑payment marks stay on record until you challenge them, and a successful dispute removes the negative mark.
3. **Add a secured credit card or a credit‑builder loan and use it responsibly** - Small, on‑time payments create fresh positive activity; keep usage low and pay the full balance each month.
4. **Become an authorized user on a trusted relative's well‑managed account** - Their good payment history can appear on your file, but only if the issuer reports authorized users to the bureaus.
5. **Set up automatic payments for all bills that report to credit bureaus** - Consistently on‑time payments are the single biggest factor in raising a damaged score.

*Always verify fees and terms before opening new accounts to avoid unexpected costs.*

Apply only for products that match a 398 score before you submit another hard inquiry, otherwise you'll likely get denied again.
To keep your credit from taking another hit and improve approval odds, run through this quick checklist before you click 'Submit.'

• **Know your score range** - Verify your current credit score (including any recent updates) so you're not applying on outdated information.
• **Target 'low‑risk' lenders** - Look for cards or loans that explicitly state they accept sub‑600 scores or are geared toward rebuilding credit; these have higher acceptance rates.
• **Use pre‑qualification tools** - Soft‑pull checks let you see potential offers without affecting your score; only move forward with a hard pull when you're confident you meet the criteria.
• **Limit inquiries** - Space out applications by at least 30 days, and avoid applying for multiple products at the same time to prevent cumulative hard pulls.
• **Check income and debt‑to‑income ratios** - Ensure the product's minimum income requirement is met and that your existing debts don't push you over typical thresholds.
• **Read the issuer's eligibility page** - Confirm any required factors such as residency, employment length, or existing relationships before applying.

By aligning each application with what lenders actually require and giving your credit file time to recover between inquiries, you dramatically reduce the chance of a second denial.

*Only apply when you meet the stated criteria; misrepresenting information can lead to legal consequences.*

A 398 credit score can still get you financing, but only in very specific, often secured, situations.

If you're willing to provide collateral or accept higher costs, lenders may approve a product; otherwise most conventional loans and cards will turn you down.

Works best when

• Secured credit card or a secured personal loan that uses a cash deposit as collateral.
• Clear repayment plan and can afford the higher interest or fees that come with high‑risk borrowing.
• You're using the account primarily to rebuild credit, and you can keep the utilization low and pay on time.

Does not work well when

• You seek unsecured credit (standard credit cards, personal loans) without a co‑signer or significant deposit.
• You need low‑interest financing or favorable terms; lenders typically price 398 as high risk, leading to steep rates or large fees.
• You lack stable income or assets to back the loan, which makes approval unlikely across most mainstream lenders.

Always read the full product agreement and confirm any collateral requirements before committing.