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Lenders who give you credit, whether it’s a car loan or a new credit card, review your credit rating to decide how likely you are to repay what you borrow. Your credit score is between 300 (bad) and 850 (excellent).

But to make lending decisions easier, financial institutions categorize the type of borrower you are by dividing consumers into five categories based on their credit rating.

If you have a credit score, your profile falls into one of the following categories: super-prime, prime, near-prime, subprime, and deep subprime.

These names describe where you stand in relation to the types of borrowers who qualify for the best interest rates and financial products.

In recent decades, banks have come under scrutiny for using these categorizations to justify discriminatory mortgage and predatory loans (characterized by unreasonable fees, rates and payments) – two issues at the center of the 2008 subprime housing crisis.

However, the categorizations are intended to help lenders and borrowers understand the types of credit products you are eligible for, the type of risk both parties take, and how terms such as APR and your amount are determined. ready.

So, before you borrow money, it helps to know what type of borrower you are currently.

Using the most recent data the Federal Office for Financial Consumer Protection (CFPB), To select breaks down the five different types of borrowers by credit score. Below, we take a look at the credit scores that make up these five categories of borrowers, why this is important, and what types of credit card options are likely available to you.

Breakdown of credit scores

The CFPB consumer credit panel defines the five different types of borrowers according to the following credit rating ranges.

  • Deep subprime: Credit scores less than 580
  • Subprime: Credit scores between 580 and 619
  • Near the premium: Credit scores between 620 and 659
  • First: Credit scores between 660 and 719
  • Super bonus: Credit scores of 720 or higher

These definitions may vary from organization to organization. For example, the credit bureau Experiential classified risk borrowers with FICO credit scores between 580 and 669. A primary borrower, in this case, is anyone with a score above 669.

A good rule of thumb is that anyone with Wrong, fair or average credit scores are considered risky borrowers, while those who Well or excellent credit are considered prime.

Why is this important

Not only is it important to be aware of the level of risk you pose to lenders, knowing your borrower classification helps you when applying for a loan or credit card.

During a recession where credit is tight, some borrowers have more access to new, cheaper loans.

Very high-end, blue-chip borrowers are more likely to qualify for the best credit cards, higher credit limits, lower interest rates and better terms. They will have an easier time financing a college education, buying a house or earning generously sign up bonus offers, as an introduction 0% APR period.

On the flip side, subprime and deep subprime borrowers are less likely to qualify for new credit cards and more likely to receive much higher interest rates or have to make larger down payments to fund something like. a new house.

How knowing your borrower type can benefit you

While a primary borrower with good or excellent credit has a better chance of approval than a subprime borrower, there are credit cards that exist specifically for those with bad credit or no credit history at all.

Now that you know the different types of borrowers, here are some examples of the best credit cards for each type so that you can compare and contrast their features.

At the end of the line

If you’re not yet a Preferred Borrower, you’re not alone. In fact, a Experian Study 2019 found that more than a third of Americans have a credit rating considered subprime.

Once you qualify for one of the credit cards available to less than privileged borrowers, you can work towards a better credit score and move on. When using your credit card, keep your balances low and make sure you always pay your bills on time.

Capital One® Secured Credit Card, DCU Visa® Platinum Secured Credit Card Information, Capital One® QuicksilverOne® Cash Rewards Credit Card, Capital One® Platinum Credit Card, Capital One Venture Rewards Credit Card, and Chase Freedom ® were independently collected by Select and was not reviewed or provided by the card issuer prior to publication.

Petal 2 Visa credit card issued by WebBank, FDIC member.

*The regular APR variable for the Visa® Petal® 2 “Cash Back, No Fees” credit card currently ranges from 12.99% to 26.99%.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

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