Prime Versus Subprime Credit

Not sure what kind of credit score you have?

You may have heard the terms prime and subprime. Obviously, subprime is going to be credit that is less than prime, but what does that even mean?

Prime credit refers to credit where it is relatively easy to borrow money. With prime credit, you can qualify for home loans, auto loans, and credit cards. You may have higher interest rates than borrowers with better credit, but you should be able to secure financing for things you can afford.

So, what is prime credit? Is it the same as good credit?

Understanding it all starts out with understanding your credit score.

Your credit score is a three-digit number that ranges from 300 to 850. There are actually two types of credit scores, your FICO Rating and your Vantage Score Rating. The three major credit reporting agencies, TransUnion, Experian, and Equifax all use one of these systems. While your score may vary by a few points from agency to agency and depending on whether they use your Vantage Score or FICO score, it should be similar from all three agencies.

The credit agencies do not label your credit as prime or subprime. Instead, they break it down into other designations. The Vantage Score ranges are 750-850 Excellent; 700-749 Good; 650-699 Fair; 600-649 Poor; and 300-599 Bad. The FICO Score ranges are 800-850 Exceptional; 740-799 Very Good; 670-739 Good; 580-699 Fair; and 300-579 Very Poor.

If you have credit that is rated Good or better on either of the two scales, then you have prime credit. You may even have prime credit if your credit score is in the top portion of the Fair group. That is because prime refers to a credit score of 620+. If your credit is below 619, it is considered subprime. If your credit is above 800+ it might be considered superprime, but being superprime generally impacts your interest rates, not your loan eligibility.

Subprime credit can make it more difficult to get loans and credit cards. If you do get to borrow money, you will have a higher interest rate. It can impact your car insurance rates and even whether or not you will get job offers. As a result, if you have subprime credit or even borderline credit, you want to take steps to improve your credit score before you need to borrow money. Square One can help.