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Lenders generally put potential borrowers into two buckets: prime and subprime. Prime borrowers are candidates who are considered most likely to make loan payments on time and in full, while subprime borrowers are considered more likely to default on their loans.
Prime borrowers typically have credit scores of 670 or above, while subprime borrowers usually have scores below that, typically in the 580-to-669 range. However, the classification can vary slightly from lender to lender and also depends on the credit scoring model used.
If your credit score falls within the top three credit scoring ranges, you are most likely considered a prime borrower. (There is another subcategory called super prime—those are generally borrowers with credit scores above 800.)
What Are the Benefits of Being a Prime Borrower?
Because prime borrowers are considered less risky by lenders, they have little trouble getting approved for credit and are typically offered the best rates on terms for loans, credit cards and mortgages. This can translate into significant savings over the lifetime of a loan.
However, prime borrowers should note that sometimes lenders advertise their best rates, which still may not be available to them. Those rates may be reserved for borrowers following in the super prime subcategory.
How Do I Become a Prime Borrower?
The best way to become a prime borrower is to improve your credit scores. To do that, you first need to know where you stand. You can check your Experian credit score for free, which makes it easy to understand your progress. You'll get information on your score, along with explainers on why it stands where it does and how you can improve it. Make note of these suggestions, because that's what you'll want to focus on to improve your score over the coming months.
Next, you should get your credit reports from all three credit bureaus (Experian, TransUnion and Equifax) and review them for errors. Make sure each credit report accurately reflects your identity and credit history. Are there any accounts listed that shouldn't be there? What about late payments that may not be correct? If errors do exist, get those corrected as soon as possible because they could be dragging your scores down.
Finally, the best things you can do to improve your credit are to pay all your bills on time, not open too many new accounts and keep your credit utilization ratio low. That means not using much of the credit you have available to you. Generally, you can do this by keeping your credit card balances low or at zero.
Can I Still Get Approved for Credit if I'm Not a Prime Borrower?
If you're not a primer borrower, all is not lost. You can still get approved for various credit cards and loan products, but there's a catch. You'll likely qualify for less favorable terms, like higher interest rates, lower credit limits or lower loan amounts.
If you're planning to take out a big loan in the future, like for a car or a home, it's worth it to spend some time trying to get yourself into the prime category. However, you could also make a bigger down payment to potentially improve your terms. Getting a cosigner who is also a prime borrower may help as well.