Subprime Borrowers' Income Is Far Higher Than You'd Think

by Christy Bieber | Updated July 21, 2021 - First published on April 5, 2020

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A subprime credit score is a problem that affects people at many income levels.

A subprime credit score is a problem that affects people at many income levels. 

A subprime credit score is a score below 670. When you have a subprime score, it will be difficult to get approved for a loan from many lenders, and you may struggle to get a credit card that is not a secured one. Landlords may also be wary of lending to you, and you may find that you have to pay higher deposits to get connected to utilities. 

Unfortunately, many Americans have to deal with these challenges. In fact, around a third of all consumers have credit scores in the subprime range, according to a recent report from Experian. But while many people think that subprime borrowers tend to have lower incomes, this isn't the case at all. In fact, Experian data shows the average household income among consumers with subprime credit is $70,990. 

Bad credit can affect Americans at all income levels

Despite a popular misconception that subprime credit is a problem of low-income Americans, the reality is that people at all income levels can have poor credit. In fact, income is not a factor in determining your credit score at all -- it's all about your borrowing behavior. That's why Americans with six-figure incomes could still have poor credit while someone with income at or below the poverty line might have a great credit score. 

Some of the factors that could lead to a subprime score include:

  • Missed payments or defaulted debt
  • Maxed-out credit cards
  • A judgement against you
  • A foreclosure, repossession, or a bankruptcy on your credit record

Sometimes, black marks on your credit report are due to sheer bad luck. A job loss or a medical problem could lead to lots of debt or even bankruptcy or foreclosure. And unfortunately, even higher-income Americans sometimes find themselves facing these problems, especially because so few households have emergency funds

Being overextended on your financial obligations can also cause the problems that lead to a subprime score. Lifestyle inflation is a common reason this happens, especially for people with higher incomes. As salaries rise, people take on new financial obligations that may be too much to fulfill. If you've bought a fancy car or a house you can't afford, you risk falling behind on payments and destroying your credit. 

What to do if you have a subprime credit score

Whatever your income level, having a subprime credit score could make it difficult for you to qualify for generous rewards credit cards, get a personal loan at a reasonable rate, or rent an apartment. You'll want to try to work on improving your score ASAP so you aren't impeded by it. 

The first step is to gain access to credit, if you don't already have it. Opening a secured credit card may be necessary if your low score prevents you from getting a standard card. You'll need to show you can use that credit responsibly by not maxing out your card and paying bills on time. 

Over time, if you avoid using too much of your credit and make payments on time, your score should climb up from the subprime level. Past negative information on your credit report that is hurting your score will also eventually matter less in terms of the impact on your score and will drop off your credit history entirely within seven to 10 years. 

No matter your income, good credit is important

Whether your income is close to the average income of people with a subprime score, or is above or below it, you can take steps to improve your credit. By following the advice above, you should be able to raise your credit score, and with time you'll have the type of credit history lenders like to see. 

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