When it comes to your credit score, you should know your 3-digit number to distinguish your financial health status. But do you know which segment you belong to? You may have seen the terms prime borrower and subprime borrower while checking your status and are wondering what they mean.
Lenders use these terms to identify what risk-level you pose as a borrower for new credit lines or loans. Depending on the model a lender uses, you could be a prime or subprime borrower. No matter where you land, you have the potential to improve your credit score and raise your borrower profile. Discover what each term means and learn how a debt consolidation loan may be the option for you.
What is a Prime Borrower?
A prime borrower is an individual who is considered a low credit risk. Borrowers in this segment are more likely to make their payments on time and repay the loan. A person is considered a prime borrower when they show a history of using their credit wisely. This leads their credit score to be higher, and they typically have no trouble getting approved for new credit lines with good terms. Depending on the model used, the range of credit scores that identify a prime borrower may be different. See a few models below:
- 660 – 719 | Consumer Financial Protection Bureau
- 670 – 799 | Experian
If you continue to improve your credit score further as a prime borrower, you may qualify to be a super-prime borrower, which is the lowest risk level of all.
What is a Subprime Borrower?
Subprime borrowers are individuals who are considered high-risk and tend to have less than perfect credit. Borrowers in this segment may have a history of debt or are new to borrowing and don’t yet have a strong credit history. Even with bad credit, subprime borrowers may still qualify or be approved for a loan, however, they may have fewer options or loans with higher interest rates due to their risk level. As we’ve mentioned before, depending on the model used, there may be different ranges to classify you as subprime. See below for subprime ranges:
- 580 – 619 | Consumer Financial Protection Bureau
- 580 – 669 | Experian
The great news is that you can improve your credit score by making on-time payments and maintaining a good credit history. Avoid opening new accounts and maintain old accounts to keep your score healthy and on the rise.
How Can a Debt Consolidation Loan Help?
Even if you have less than perfect credit, you still have options to get you out of debt. One of the most effective ways to pay off your credit card debt is to use a personal loan for debt consolidation. Reduce your debt and improve your credit score at the same time by combining all of your credit card debt into one monthly payment. If you’re looking for a debt consolidation loan, consider Lendah first. We have access to a network of over 30 lenders, so we can find loan options that fit your budget.
Related Article: Why Debt Consolidation Loans Help in the Long-Term
If you have questions about debt consolidation loans, speak to our team of knowledgeable professionals. Our compassionate loan matchmakers will find the best terms tailored to your unique situation – with fast approval and rates starting as low as 3.84% for amounts up to $100,000.
Get started today on our website. Prefer to talk in person? Call us at 833-453-6324, and we’ll get you connected immediately with one of our loan experts.