 TITLE: What Does Subprime Mean? CONTENT: Difference Between Subprime and Prime Consumers\n-----------------------------------------------\nWhat makes one consumer a subprime candidate for credit and another a prime borrower? The simple answer is that prime borrowers have higher credit scores than subprime borrowers, but that's just scratching the surface.\nCredit scores are derived from information found in the credit reports compiled at the national credit bureaus. Those reports, in turn, record your history of managing and repaying debt. They contain information about loans and credit cards you've taken out (including loans you may have paid off completely and credit card accounts you closed as long as 10 years ago). Credit reports keep tabs on your accounts, whether those payments were late or on time, and how close to your credit limits you are on your credit cards. If you've suffered severe financial setbacks, including bankruptcy, home foreclosure, vehicle repossession or the submission of unpaid bills to collection agencies, those events may appear on your credit report as well.\nCredit scoring systems apply sophisticated statistical analysis to the information in your credit report and, based on the historical actions of millions of consumers, look for combinations of behavior that indicate how likely you are to fail to repay your debts. This forecast is distilled into a three-digit number, typically on the scale of 300 to 850 used for both the FICO® Score and current versions of the VantageScore® system. A person with a higher credit score is statistically more likely to pay their bills than someone with a lower credit score.\nA person might have a credit score in the subprime range for at least a couple of reasons:\n*   So-called thin-file borrowers have little to no evidence of experience with debt and credit, and therefore lack enough of a track record to have earned a higher score. With time and consistent timely payment of their debts, thin-file borrowers can steadily improve their credit scores.\n*   Other borrowers may have subprime credit scores because mistakes or missteps in the past led to negative information in their credit reports that are hurting their credit scores. These borrowers can improve their credit scores as well, but the amount of time needed to do so may depend on the severity of the negative information.\nFrom a lender's standpoint, the difference between a prime borrower and a subprime borrower can be significant. While subprime borrowers are often limited to loans and credit cards with higher interest rates, and fees and relatively low borrowing limits, prime consumers have a greater range of choice, with better rates and terms available. END