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Advice

Prime borrowers have a credit score almost 200 points higher than subprime borrowers—here's how else they compare

CNBC Select provides a snapshot of how prime and subprime borrowers stack up to one another.

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There are five different types of borrowers that exist, segmented by their credit scores: deep subprime, subprime, near-prime, prime and super-prime.

With credit scores ranging from 300 to 850, lenders consider those on the higher end as prime consumers and those on the lower end as subprime.

As the name "prime" suggests, raising your credit score is a smart goal for your financial future. With a prime score, you can more easily get approved for new credit and better terms.

However, it's not the end of the world if you're behind: More than a third of Americans fall into the subprime credit category, but, with positive habits, credit scores can increase over time.

To see what the average prime borrower's finances look like so you can compare where you're at, CNBC Select gives a breakdown below of the two using credit bureau Experian's most recent data from Q1 2020.

Here is what it means to be subprime versus prime.

Subprime versus prime

Average subprime borrower Average prime borrower
FICO credit score578767
Estimated income$68567$98206
Credit cards2.84.5
Credit card balance across all cards$5805$6236
Additional retail / store credit cards2.23.4
Retail / store credit card balance across all cards$1799$952
Student loan balance$36389$37705
Auto balance$18815$19889
Mortgage balance$163505$216070
Total debt$55135$110110

What the data shows

The data across subprime and prime borrowers above shows that prime consumers outpace their counterparts in nearly every category, from average FICO Score to average debt.

Because subprime borrowers in general have lower credit scores, they present more risk compared to prime borrowers. Lenders may see them as more likely to pay their bills late or miss them entirely. For this reason, subprime consumers have a harder time getting approved for new credit and, when they do qualify, they often have less favorable terms: low credit limits and high interest rates.

This is why, as you see above, prime borrowers can carry a higher revolving balance across their credit cards and still maintain a good credit score. They likely have higher credit limits, so their balances doesn't affect their overall credit utilization rate as much as someone carrying a balance on an already low credit limit.

Note that prime borrowers also have smaller balances on their retail, or store, credit cards. These types of cards are known for charging notoriously high interest when you carry a balance, making them expensive to have. Even though prime borrowers open store credit cards, this shows that they are a bit more conservative when it comes to how much of a balance they carry on them.

And though prime consumers have more debt overall than subprime, the two types show a healthy mix of credit, including both revolving (credit cards) and installment (student loans, car payments and mortgages). Because prime borrowers have higher credit scores, it's likely they have a much better payment history on these debts than subprime borrowers.

Paying your bills on-time is the biggest factor in improving your credit score, so it's a good first place to begin improving your score. We recommend paying your bills by the due date and in full so as to not accrue any interest.

As you work your way up to a prime credit score, see how actions in your credit report reflect your improvement. In addition to pulling your report for free through AnnualCreditReport.com, you can choose to sign up for a credit monitoring service that tracks any changes made to your report in real time.

Both CreditWise® from Capital One and Experian free credit monitoring ranked on CNBC Select's list of the best credit monitoring services because they are free to use. By being alerted to changes in your credit report and seeing how your credit score updates, you can identify what actions help you and what set you back. For instance, opening up a new credit card will trigger a hard inquiry onto your credit report so you are likely to see your score drop a few points if you take that action.

CreditWise® from Capital One

CreditWise® from Capital One
Information about CreditWise has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Cost

    Free

  • Credit bureaus monitored

    TransUnion and Experian

  • Credit scoring model used

    VantageScore

  • Dark web scan

    Yes

  • Identity insurance

    No

See our methodology, terms apply.

Experian Free Credit Monitoring

Experian Free Credit Monitoring
Information about Experian free credit monitoring has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Cost

    Free

  • Credit bureaus monitored

    Experian

  • Credit scoring model used

    FICO

  • Dark web scan

    Yes, one-time only

  • Identity insurance

    No

See our methodology, terms apply.

With CreditWise from Capital One, you can also use its credit score simulator to see what making on-time payments for six, 12, 18 or 24 months would do to your score. And with Experian free credit monitoring, users can take advantage of Experian Boost, which lets you add positive payments for phone, utility and streaming bills to your Experian credit file, potentially raising your credit score.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.