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Do You Have a Subprime Credit Score? How to Improve It

Subprime credit is typically a FICO score that falls below 670, and nearly one-third of US consumers have it, according to data from the credit bureau Experian. A subprime credit score can make credit more expensive and more difficult to access than if your score were good. With subprime credit, you may have fewer options for credit cards, mortgages and auto loans.

Here’s more about subprime credit, including how subprime borrowers can access it, and how to improve a subprime credit score.

What Is a Subprime Credit Score?

A subprime credit score is a score that presents a greater lending risk than a prime or superprime credit score. Subprime scores are classified as poor or fair, both of which sit at the low end of credit score ranges. Typically, subprime is a FICO credit score of less than 670 or a VantageScore of less than 600.

A subprime credit score could be due to lesser factors in concert, such as a lot of credit card debt and new accounts, says credit expert John Ulzheimer, formerly of FICO and Equifax. But a major factor, such as filing for bankruptcy or letting an account go bad, could also lead to subprime credit.

“Default on something tomorrow, and your score will be at or below 680,” Ulzheimer says.

Who Is a Subprime Borrower?

A subprime borrower is someone whose credit does not qualify for prime rates and terms. The prime rate is the best rate lenders will offer their most creditworthy customers and a starting point to set rates for loans and credit cards.

Subprime borrowers may have:

  • Recently missed payments on credit accounts.
  • Experienced a recent charge-off, repossession or foreclosure.
  • Filed for bankruptcy in the last several years.
  • Piled up debt and ended up with a high debt-to-income ratio.
  • Faced constraints because of limited credit history.

Subprime borrowers should expect to pay more for credit, generally in the form of higher interest rates compared with good-credit borrowers. Lenders charge subprime borrowers more to compensate for taking on more risk. If you’re a subprime borrower, you haven’t proved your creditworthiness, and lenders know you have a better chance of missing payments or defaulting.

What Are Subprime Credit Cards?

Subprime credit cards are cards designed for people with poor or limited credit and issued by major banks and subprime credit card companies. These cards tend to charge higher interest rates than traditional credit cards, often annual percentage rates that could exceed 30%, to reflect the high default risk. You could also have a low credit limit or an upfront deposit.

However, a subprime credit card could help you rebuild your credit if you pay your bills on time and keep a low balance or pay it in full. Your card may also have a rewards program and other helpful features, such as free credit score access.

Here are a couple of examples that were rated highly by US News among cards for the credit-challenged:

The Capital One QuicksilverOne Cash Rewards Credit Card Requires fair to good credit and charges a $39 annual fee. Cardholders earn unlimited 5% cash back on hotels and rental cars booked through Capital One Travel, the issuer’s booking portal, and unlimited 1.5% back on all other purchases. Free unlimited access to your credit score can help you monitor your credit health, plus you will automatically be considered for a credit limit increase after six months.

The Citi Secured Mastercard is designed for people with no credit history and has no annual fee. If you meet income and debt criteria, you will be approved for a card but required to provide a deposit equal to your credit limit. The minimum deposit is $200. This card offers autopay and account alerts, which can keep you on track of payments, and it reports to all three credit bureaus to help you build credit history. Citi will review your account within 18 months to determine whether you are eligible to have your deposit returned.

What Are Subprime Loans?

Subprime loans, including mortgages, personal loans and auto loans, are available to borrowers who cannot qualify for loans at the best rates. As with subprime credit cards, subprime loans tend to be costly because of the consumer’s high credit risk.

Subprime mortgages can have higher interest rates, higher upfront expenses, and higher short- and long-term costs. Rates alone are 8 to 10 percentage points higher than for prime mortgages, according to data from Experian.

That’s tough when mortgage rates for well-qualified borrowers have surged past 6%. You could end up paying double-digit rates for a subprime mortgage.

“There are ways to get mortgages when your score is relatively low,” says Jeff Richardson, senior vice president of marketing and communications at VantageScore Solutions.

Federal Housing Administration loans, for example, are available to borrowers with a 500 FICO score and a 10% down payment. Many FHA lenders will require a higher credit score, though still subprime, for a loan. ,

Whether you are seeking a mortgage or an auto loan, you can find lenders willing to work with subprime borrowers. Just know that you could pay hefty rates for the privilege of borrowing.

“For a 60-month new auto loan, as soon as you start falling below 700, rates start getting punitive,” says Ulzheimer.

You can choose to pay the higher rate or lower your cost of borrowing by limiting your budget. If you can improve your credit, you may be able to refinance to a better rate.

How to Improve a Subprime Credit Score

Even small improvements to your subprime credit score could get you better deals on credit cards, loans and other types of financing. Here are some ways to move your credit score out of subprime territory:

  • Always pay bills on time. Do your best to be on time, even if you can only make a minimum payment.
  • Pay down credit card balances. The quickest way to see your score improve is to pay down credit cards if you have high credit utilization, Richardson says. Your score could improve on the next billing cycle if issuers report the lower balances. Aim to use no more than 30% of your total available credit or even less for a healthy credit score.
  • Add positive information to your credit record. Try Experian Boost to add on-time utility, rent and streaming service payments to your Experian credit files.
  • Clean up your credit reports. Request and review your reports, and dispute credit errors. Remove incomplete or inaccurate information from each credit report.
  • Consider debt consolidation. Could a debt consolidation loan give you a better rate than your credit cards on your debt and simplify your payments?

Improving a subprime credit score takes patience and time. Late payments, collections and bankruptcies can linger on your credit report for years, though their effects lessen with time.
Luckily, negative information counts less as time goes by, Richardson says. “Credit improvement is often a marathon, not a sprint,” he says.

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