Mr Credit CardDefinite of SubPrime
Simply out, a subprime consumer is one that does not have good credit. However, how one defines sub-primes varies among credit bureaus, banks and mortgage lenders. Here is how the three major credit bureaus define subprime.
Experian defines subprime borrowers as those who have FICO scores between 580 and 669. According to them, these scores are slightly below the average credit score of 711 (based on December 2020 data).
Equifax also defines a subprime borrower as one who has a FICO score of between 580 and 669. According to them, those whose scores fall below 580 are considered to have "poor" credit range.
Using VantageScore 3.0 as the measuring yardstick, TransUnion defines subprime borrowers as those have a score of 300-600. They define borrowers with scores between 601-660 as near-prime and 661-720 as prime. This definition is not really inconsistent with Equifax or Experian because TransUnion's definition of "near-prime" is 610-660. I would say near-prime is still not prime and can be considered subprime. For both Experian and Equifax, they consider borrowers with lower FICO score than 580 "poor" rather than subprime whereas TransUnion makes no such distinction.
So if we were to consider how all three major credit bureaus define what is a subprime borrower, I would follow the definition by Experian and Equifax and state that subprime borrowers have a FICO score of between 580 and 669.
Characteristics of Subprime Borrowers
Below are key characteristics and traits and subprime borrowers versus prime borrowers.
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| Subprime | Prime | |
|---|---|---|
| Avg credit card debt | $4,592 | $5,107 |
| Avg number of credit card accounts | 2.6 | 4.2 |
| Avg auto debt | $19,106 | $20,458 |
| Avg number of auto accounts | 0.7 | 0.7 |
| Avg personal loan debt | $8,756 | $21,359 |
| Avg number of personal loan accounts | 1.4 | 0.7 |
| Avg student loan debt | $37,669 | $40,558 |
| Avg number of student loan accounts | 1.2 | 0.8 |
| Avg HELOC debt | $52,110 | $39,718 |
| Avg number of HELOC accounts | 0.4 | 0.5 |
| Avg mortage debt | $162,385 | $220,858 |
| Avg number of mortgage accounts | 1.6 | 2.5 |
Best Credit Cards for Subprime Borrowers
Below is our recommended list of credit cards for subprime borrowers. One of the key differences between subprime credit cards and credit cards for bad credit is that with subprime credit cards, you should only be paying an annual fee (and possibly no annual fee) and not having to pay any monthly fee or one-time processing fees which are common for credit cards targeting those with poor credit. Subprime credit cards also tend to give higher starting credit limits and/or have track record of increasing your credit limits over time.
Why We Recommend This Subrpime Card? : The Merrick Bank Double Your Line Visa is arguably the best subprime credit card because of a couple of reasons. Firstly, the annual fee is very reasonable ($0 to $72) and there is a chance you might get offered a card with no annual fee. Secondly, the starting credit limit is very generous (between $500 and $1,350). Thirdly, if you pay your first 7 minimum payments on time, Merrick Bank will double your credit limit.
Requirments - To get approved for this Merrick Bank credit card, you need to at least have the following criteria to improve your approval odds. Firstly, you need a credit score of above 580 thought 650 is really the sweet spot. Secondly, Merrick Bank is really picky about having too many recent hard inquiries. Ideally, you do not want to have more than 2 hard inquiries during the last 6 months. You should also have paid on time for ALL your bills during the last year. You should ideally have a debt to income ratio of not more than 35% and also have your derogatory items on your credit reports paid or settled.
Annual Fee: $0-$72
Regular APR: 19.45% - 28.45%
Starting Credit Limit: $500 - $1,350
Read our review of the Merrick Bank Double Your Line Platinum Visa
Why we like recommend this subprime card? - We recommend the Mission Lane Visa to folks who have credit scores of higher than 580 for several reasons. Firstly, there is a chance for you to get a no annual fee credit card as the annual fee ranges from $0 to $59. Secondly, you will be evaluated for a credit limit increase after 7 months if you pay your minimum payments on time. Many folks have reported a doubling of their credit limits. Mission Lane also does not charge any monthly fee or one-time processing fee. Before you apply, you can check if you pre-qualify with no impact on your credit score. So you should do it anyway and see what terms you get.
Requirements -
Annual Fee: $0 to $59
Regular APR: 26.99% - 29.99%
Starting Credit Limit: $300 - $1,000
Read our review of the Mission Lane Visa
Why we like recommend this subprime card? - The Blaze Mastercard is a card we would recommend to those who have mid 600 score. It has an annual fee of $75 and starts you off with a credit limit between $350 and $1,500. What is great about this card is that they will review your account for credit limit quite frequently (every 6 months or less) and many folks have got their credit limit increased and some as high as $5,000 over time. They also report very promptly to the credit bureaus and rebuilders will be impressed by the speed of their reporting.
Requirements - You should have mid 600s score to have a good shot of approval.
Annual Fee: $75
Regular APR: 29.99%
Starting Credit Limit: $350 - $1,500
Read our review of the Blaze Mastercard
Why we like recommend this subprime card? - The Oportun Visa credit card is another good subprime card because again like the other cards we have mentioned, they review your account automatically for credit limit increases. The annual fee of between $0 and $49 is very reasonable and you stand a chance of getting a card with no annual fee at all. You will also get a $100 credit limit increase within 30 days if you link your bank account to their app.
Requirements - You should have mid 600s score to have a good shot of approval.
Annual Fee: $75
Regular APR: 29.99%
Starting Credit Limit: $350 - $1,500
Read our review of the Oportun Visa Credit Card
Why We Chose and Like This Subprime Card? - We have chosen the Reflex Mastercard as one of the cards we recommend for two reasons. The first reason is that they have generous starting credit limits of between $300 and $1,000 and your credit limit will double after 7 months of paying your minimums on time. That means that after 7 months, your credit limit will be between $600 and $2,000.
The second reason we like this card is because it has a flexible range of fees and interest rates and starting credit limits depending on your credit worthiness. For example, if you fall on the upper end of the credit spectrum (ie about 620-650 score), you might get a card with $75 annual fee, a starting credit limit of $1,000 (which doubles to $2,000 after 7 months). If your credit score is on the lower end of the spectrum, you might get a lower starting credit limit and higher fees.
However, before you apply, you can go through a pre-approval process with no impact on your credit score first and find out if you are pre-approved and also the terms of your offer before deciding whether to proceed with actually applying for the card. Reflex also has a mobile app and provides a free Vantage credit score for their cardholders.
Requirements - Annual Fee: $75-$99
Monthly Fee - $0-$10 a month
Regular APR: 24.9% - 29.9%
Starting Credit Limit: $300, $500, $750, $1,000
Read our review of the Reflex Mastercard