When it comes to credit, approval is all in the number—the three-digit number that’s your credit score. Most lenders and credit card issuers use this number to determine your risk level as a borrower. In general, credit scores are categorized as bad, poor, fair, good, good or excellent.
However, another important designation impacts whether you’ll get approved for a credit card or loan, the interest rate you pay and your terms. That’s the prime vs. subprime credit score designation. Really, It’s no different than bad, poor, fair, good, good or excellent, it just used different terminology.
Subprime encompasses bad, fair and poor credit. Prime covers good and excellent. And sometimes superprime is used to encompass the top tier of excellent. Table 1 shows how that breaks down.
Table 1: Credit scores, ranges and prime vs subprime designations
|VantageScore Score||VantageScore Rating||FICO Score||FICO Rating||Prime vs Subprime Designation|
|740-799||Very Good||Prime (750-799)|
Supbrime (< 619)
Learn more about VantageScore vs FICO.
Prime and superprime borrowers are more likely to qualify for credit cards and loans and access better interest rates, terms and perks, such as rewards, including points and cash back. That said though, there are credit cards for people with poor credit, bad credit and even no credit.
Is My Score Prime or Subprime?
Although each lender has its own criteria about which scores it considers prime and which scores it considers subprime, generally, you need a score of at least 740 to be considered a good risk by lenders. Scores of 620 to 799 are usually considered prime. Scores below 620 are subprime. And individuals with superprime scores have scores that exceed 800.
The Fair Isaac Corporation, the inventor of FICO scores, releases periodic data about score distribution among United States consumers. Their most recent average FICO score data, released in September 2018, gives the following breakdown of prime vs subprime credit scores:
- 1% of Americans have a bad credit score (under 600).
- 6% of Americans have a poor credit score (600-649).
- 13% of Americans have a fair credit score (650-699).
- 2% of Americans have a good credit score (700-749).
- 42% of Americans have an excellent credit score (over 750), with 21.8% with scores of 800 or higher.
Based on these numbers, less than 28% of U.S. consumers fall into the subprime category. The remainder of Americans, up to 38.8%, are prime borrowers.
If you’re wondering where you sit, you can get your free VantageScore credit score from Experian here on Credit.com.
What Are the Effects of Prime vs. Subprime Credit?
A prime credit score makes it much easier and more affordable to get a credit card—especially if you want a rewards credit card—purchase a home, buy a new car or finance home repairs or higher education.
A subprime credit score can make it more difficult to qualify for a credit card or loan. And if you do, you’ll likely end up paying a higher interest rate for the card or loan.
When you improve your credit score and get into the prime or super prime category, you get lower interest rates, higher loan amounts and credit lines and even special programs like rewards credit cards, low APR credit cards and sign-up bonuses like and 0% APR on purchases and balance transfers.
Subprime borrowers sometimes have to take additional steps to be approved for a loan. For example, a cosigner with good credit can improve your chances to qualify. However, he or she is responsible for payments if you default on the cosigned credit card or loan. If you’re buying a home or a car, the lender may require a higher down payment than it does for a prime borrower.
Although interest rates for a prime vs subprime credit score vary dramatically depending on the type of loan and the lender, you could pay tens of thousands less over the life of the loan if you have prime vs subprime credit score. For example, a subprime auto loan can have an interest rate of 10% or higher, while prime lenders can access rates of less than 5% or even 0% with special financing.
A credit card for subprime borrowers can carry an interest rate of more than 25%, compared to less than 10% or even an introductory rate of 0% for a prime or superprime credit score.
According to the federal Consumer Financial Protection Bureau, subprime mortgages are more likely to have an adjustable interest rate, which means your interest and monthly payment amount can increase over time. Prime mortgages are more likely to carry a fixed rate.
Keep in mind that a prime credit score isn’t necessarily a one-way ticket to loan approval. While lenders take your credit scores into account, they also consider factors like income, debt utilization and overall finances when deciding whether to extend you credit or a loan.
What Factors Impact My Score?
If your credit score falls into the subprime range, your credit history might not be long enough for lenders to make an astute judgment about your ability to repay a loan. Using credit responsibly by making payments on time and keeping a low balance on the cards you do have may slowly improve your score.
Other common characteristics of subprime borrowers include:
- A high credit utilization ratio, which is the amount of your available credit you’re currently using. Lenders generally like to see a ratio of less than 30% with 10% being ideal.
- A history of late payments—Most lenders report late payments to the three major credit bureaus after 30 days, with additional reporting at 60 and 90 days late.
- A history of defaulting on debt—These debts may be written off by the lender because they were not repaid after several years or sent to collections.
- A history of legal judgments or bankruptcy—These are seen as serious black marks by lenders and remain on your credit report for seven to 10 years.
How Can I Improve My Credit Score?
Moving from the subprime to prime credit score category has distinct benefits that put you on the path to a brighter financial future. You may be able to buy a home instead of renting. If you lease, you’ll have a better selection of properties to choose from. You’ll have lower interest rates on everything from your mortgage to your car loan to your credit cards, which means you’ll spend less money on monthly payments and more to put toward repaying debt, savings and meeting other financial goals.
Whether you’re working to exceed the 740 credit score threshold or want to maintain your already excellent score and become a superprime borrower, try these tips to improve your score:
- Check your credit report and score. If you don’t know where you stand when it comes to prime vs subprime credit, you can’t be able to take steps to boost your rating.
- Dispute any inaccuracies on your credit report that could be affecting your score.
- Set up automatic payment reminders through your financial institution or on your phone or email calendar. You can receive a text or email so that you never miss a payment, helping you avoid late fees and dings to your credit score.
- Pay down some of your debt to improve your credit utilization ratio. Lenders like to see borrowers using no more than 30% of your available credit. If you’re able to do so, opening a new line of credit will improve your utilization and subsequently, your credit score.
- If you’ve missed payments in the past, bring those accounts current to improve your account standing, especially if some items have gone to collections. Once that happens, the black mark will remain on your credit report for seven years even if you eventually pay.
- Keep old accounts open. The length of your credit history contributes to a healthy score, so even if you’re no longer using a card you avoid closing it.
- Avoid applying for too many accounts in a short period of time. Lenders may see this as a red flag and the resulting hard inquiries have a negative impact on your score.
- Create a budget and expenses you can eliminate or reduce to repay your debt. This not only boosts your score but also puts you on track to reach other financial goals—like building an emergency fund.
Learn more about how to improve your credit score.