What Credit Score is Subprime Lending?

Question

What credit score makes you a subprime borrower? Also, are all FHA loans subprime?

Answer 1

Banks lend money to people because they can make money off the interest. In a situation where a bank agrees to lend money to a person and that person does not pay the bank back, the bank loses a lot of money -- for this reason banks developed the credit score system to classify people based on their creditworthiness -- the likelihood that they will pay the bank back the money and on time. People with a low credit score (generally anything less than 700) they are offered interest rates relative to the amount of the risk the bank is taking on in lending to that person. So someone who has an even lower score is going to get a higher interest rate, and these loans are what are considered to be subprime because of the high risk to the bank of not being paid back in full.

FHA loans are geared toward first-time home buyers who are new and naive -- this doesn't necessarily mean they are subprime, but they're geared more towards the novice.

As you may or may not know it is very difficult to buy a house now for people with low credit scores (less than 700.) The stock markets are falling and companies are failing because they lent money to people who were not creditworthy at ridiculous rates they could not afford. Fixing your credit score to get the best rates is the best thing you can do right now if you want to buy a home so let me share with you my tips that you can use to build your credit score quickly.

I raised mine to well over 700 points fro 500 using these steps in less than a year -- :

# Know and Track Your Credit Score (be sure to sign up for the free trial of your credit score tracking listed below. It really helped my get my score up.)
# Never Miss a Payment, Starting Today
# Never use more than 20% of your Available Credit
# Keep Credit Cards that Have No Annual Fees Open For as Long as Possible
# Extend Your Credit Limit on Cards You Already Have before You Get New Ones
# Get Credit Cards that Have CashBack Rewards to Contribute to your Balance
# Transfer Your Balance to a Credit Card with a Lower Interest Rate and a Higher Available Credit-
# If You Think You Are Going to be FORCED to Pay a Bill Late Ask for an Extension or Payment Plan
# Take out a Small Personal Loan and Repay it Over a Year
# Ask Someone With Good Credit if They will Account Shadow you

Read more here:
10-Ways to Boost Your MyFico Score
http://millionster.com/articles/debt/increase-fico-credit-score/

When you're trying to build a solid credit score it's important to get a comprehensive view of what is actually effecting it...
Your Credit Score (also known as your MyFico score) is calculated with the following breakdown:
35% - Payment History
30% - Credit to Debt Ratio
15% - Credit History
10% - New Credit
10% - Credit Types in Use

If you excel in one area and lack in another, only fixing the areas which you lack are going to improve your score

Answer 2

There is no set credit score that determines subprime. Sometimes you have to get a subprime loan for reasons other than credit.

For example: If you have good credit and you make good money, but you don't have any cash in the bank, subprime lenders will lend to you because they don't check for assets.

If you are looking for more cashout of your house, subprime lenders can sometimes lend more cash at a higher rate than regular prime lenders.

FHA loans are totally different from subprime. They are two completely different programs. FHA does NOT determine risk based of a credit score which means you could have a very low score, but if you've got a good pay history and solid job history, you will more than likely be approved for an FHA loan. FHA loans are regulated the the Federal Housing Administration and are designed to lend to people that make good money and pay their bills on time, but wouldn't otherwise be able to qualify.

Answer 3

You need a score of at least 620 to qualify for government grants such as Fannie Mae. Anything below 600 puts you into the Subprime category. If your score is between 600-620 you can expect to pay around 9% interest. Word of advice...if you don't have a score of at least 620 and have 10% of the purchase price for a down payment (plus the 3-6% for closing costs) you probably aren't ready to purchase.

Answer 4

I won't dispute the numbers given in prior answers. There is no fixed score that qualifies as Sub-prime, good, excellent, or any other category of loan. Each lender has there own standard. As for FHA loans, the majority are NOT sub-prime. I would not be surprised if someone could cite a source to show none are.

Answer 5

Generally under 620-650 is subprime.
FHA loans aren't always subprime,no.