What Is a Prime Credit Score?

Just a few points can come between a lender considering you a good risk and a terrible or "sub-prime" borrower. While nothing is ever set in stone in the lending industry, lenders have come to general consensus over time on what constitutes a prime borrower. Holding a prime score, however, does not guarantee you the best rate on a loan, because the prime score range contains many levels.

Identification

The Fair Isaac credit scoring system ranges from 300 to 850. In general, scores between 620 and 850 fall into the category of "prime," according to Bankrate. This means that borrowers in this category have a high rate of repaying their loans on time. Lenders below 620 have a default rate so high that the creditors must account for the risk by raising interest rates by a few points.

Levels

Lenders tend to recognize varying degrees of "prime" credit. The most important tiers in prime scores are 750 to 850 and 700 to 740. These top two levels garner the lowest rates from lenders, with 750 to 850 getting a few tenths of a percent lower then the second highest tier. This might seem like an insignificant difference, but means thousands on large, lengthy loans like a mortgage or car loan.

Benefits Go Beyond Loans

Since the use of credit scoring in the 1980s, credit scores and credit report have gained importance in circles outside of the lending industry. Insurance companies, for instance, set premiums in part on a borrower's credit score in states that allow it. Employers can take credit history into consideration when choosing a new hire. Utility providers often charge higher rates or a security deposit for customers with less than prime credit.

Tip

Most borrowers can enter the prime category by paying their monthly bill on time and reducing debt levels. If you are close to the cutoff line, Go Banking Rates suggests holding off on applying for new credit until and instead working on the accounts you already have. Consumers should at least make the minimum payments -- this maximizes the amount of interest you pay, but lets the creditor report the account as "paid as agreed."