Subprime Standards
By Scott Sumerford on Tuesday, November 6th, 2007 :: 4:52 pmCategory: Watching Out 4 You
Do you know if banks and lenders consider you a subprime borrower? Your creditworthiness determines the interest rates lenders will offer you on loans. Subprime interest rates are usually several points higher than prime interest rates. The difference will cost you thousands if you fall into the subprime category.
Subprime criteria
Though lending standards are proprietary, banking regulators typically consider the following criteria as subprime:
- FICO scores under 650
- Foreclosures or charge-offs within the past 24 months
- Previous bankruptcies
- A debt-to-income ratio of 50 percent or higher; meaning your debt is more than half your yearly income.
- Two or more delinquent payments in the last year or any 60-day delinquencies in the previous two years.
The common theme in determining if you are a subprime borrower is debt. If you have a significant amount of debt, then your credit score will be lower, your debt-to-income ratio will be less favorable, you will be more likely to have delinquent payments and you may be in danger of a foreclosure because you have trouble paying your mortgage payments and credit card bills.
Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. Read more about how Credit Solutions offers a viable alternative to debt consolidation.
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