What Is Super-Prime Credit?
A credit score that is at the top of a credit bureau’s score range is referred to as super-prime credit. Super-prime credit customers are thought to have great credit and offer the least risk to lenders and creditors. Because clients with super-prime credit are deemed to be the lowest risk, credit card firms and lenders give their finest credit cards and loans with the lowest interest rates and most advantageous conditions to them.
- Customers with super-prime credit have credit ratings that are at the top of a credit bureau’s range.
- Consumers with super-prime credit have a strong credit history and are more likely to repay their debts.
- Super-prime consumers will often get the greatest loan terms and interest rates from credit card companies, banks, and other lenders.
- Due to the diverse techniques used by credit bureaus to construct credit scores, a consumer’s credit score and categorization as super-prime, prime, near-prime, or subprime might vary per credit bureau.
Understanding Super-Prime Credit
Equifax, Experian, and TransUnion, the three main credit agencies, each have their own credit score range. Equifax’s range is 280 to 850. 1 The ranges of TransUnion and Experian are 300 to 850.23 Super-prime credit is defined as a score at the top of these ranges.
According to Experian, a credit score of 740 or above is considered super-prime. Consumers with somewhat lower scores, ranging from 680 to 739, are called prime borrowers and are provided highly favorable conditions, while their interest rates may be significantly higher than those paid by super-prime borrowers.
Super-Prime Credit Interest Rates
Consumers with super-prime credit will often have access to better loan conditions and cheaper interest rates. For example, if a super-prime applicant can receive a vehicle loan at 2.7% APR, a prime borrower may get the same loan for 3.1% APR. The majority of new credit and loans issued by banks go to super-prime and prime borrowers since they are the most likely to repay what they owe. In credit-constrained markets, super-prime borrowers are more likely to keep their credit than subprime, near-prime, and even prime borrowers.
The credit bureau may modify a consumer’s credit score and categorization as super-prime, prime, near-prime, or subprime for two reasons. One, since some lenders only report to one or two of the three credit agencies, the consumer’s credit file with each agency may have somewhat different information. Two, each agency calculates credit ratings in a different way. As a consequence, a customer labeled as super-prime by one bureau may be classed as prime by another.
Characteristics of People With Super-Prime Credit
The Consumer Financial Protection Bureau (CFPB) will issue its biannual study, “The Consumer Credit Card Market,” in September 2021. 4 The 177-page study contains a wealth of information on Americans with super-prime credit, defined as a credit score of 720 or above. 5 The study contains information that anybody wishing to enter the exclusive ranks of those customers with the highest ratings may find valuable.
According to the CFPB study, super-prime cardholders had an average 2020 year-end balance of just under $5,000 on their general-purpose cards. This is much less than the average balance of people with prime credit, which was roughly $8,000. 6 Super-prime cardholders owed little more than $1,000 on private label or store-branded credit cards, while near-prime cardholders owed almost $1,900. 7
Approximately 95% of super-prime cardholders have at least one credit card, with four open credit card accounts on average. Not unexpectedly, credit card issuers preferred to provide credit to super-prime clients, granting almost half of all new credit cards to them. 8
Consumers with great credit do not use their credit cards to the full extent of their available credit. According to the CFPB analysis, unused lines on accounts owned by customers with super-prime credit account for the majority of the increase in accessible credit.
According to the CFPB study, credit card accounts are classified as “transacting” or “revolving.” Cardholders who pay off their accounts in full before the following credit cycle starts (and thereby avoid accruing interest costs) are classified as transactional. Cardholders in the revolving category do not pay their accounts in full and allow amounts to continue over. 9
The vast majority of customers with great credit pay down their credit card amount in full each month. A balance was carried over to the next month by around 40% of super-prime borrowers, compared to approximately 80% of prime accounts, 85% of near-prime and subprime accounts, and approximately 90% of deep subprime accounts. 10
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