What Is a Prime Borrower?

A prime borrower is someone who is considered a below-average credit risk. This type of borrower is considered likely to make loan payments on time and likely to repay the loan in full.

Understanding Prime Borrower

Prime borrowers have credit files that show a strong history of using credit wisely and handling loans responsibly. As a result, their credit scores tend to fall on the higher end of the spectrum, albeit not as high as those of super-prime borrowers. While prime borrowers pose a low risk to lenders and creditors, super-prime borrowers pose the least risk. A prime credit score usually falls somewhere in the 640 to 740 range, though the exact score that is considered prime depends on the scoring model used.

Prime borrowers usually have no trouble getting approved for new credit cards with favorable terms and conditions or getting approved for mortgages or other loans. In spite of this, prime borrowers still may not be eligible for lenders’ advertised rates, which are sometimes intended only for super-prime borrowers.

If a prime borrower’s credit score slips below the range classified as prime, the borrower will no longer be able to easily obtain new loans and credit cards or get the best terms. Borrowers with credit problems, who are classified as subprime or near-prime, almost always have to pay higher rates.

Different Scores for Different Credit Bureaus

Equifax, Experian, and TransUnion, which are the three major credit bureaus, each has their credit scoring range and methods for classifying borrowers. In some cases, all three credit bureaus will deem a borrower a prime borrower. In other cases, however, one credit bureau will deem a borrower a prime borrower, and another will put the same borrower in a different category. Aside from the varying scoring methods, sometimes each of the three bureaus has slightly different information about a borrower’s credit history because not all creditors report to every bureau.

For example, if a borrower has a delinquent auto loan that was only reported to TransUnion, the borrower’s TransUnion score might make the borrower a near-prime borrower. The same person’s Equifax score, which doesn’t factor that delinquent loan into the credit score, might result in a prime borrower classification. For this reason, borrowers may benefit from contacting several different lenders when shopping for a loan. Different lenders may pull a borrower’s credit score from different credit bureaus, which means the borrower may qualify for a better rate with one lender over another.