Average credit scores for consumers in the U.S. continue to hover around 700. Over the past ten years, consumer FICO credit scores have increased from 689 to 704. Interestingly, the percentage of Americans with low or sub-prime credit scores has increased while consumers with very high or super-prime scores has also increased by approximately the same amount.
Most Americans have FICO credit scores between 660 to 720. Credit card issuers, like many other lenders, consider scores between 550-660 as sub-prime; 660-720 as near prime; 720-800 as prime; and 800-850 as super-prime.
All of the major credit card issuers offer prime-based variable rates adjusted to creditworthiness or risk, with the highest rates charged to cardholders with a score of more than 660 and the lowest rates going to cardholders with a score above 750.
Sub-Prime Credit Cards
The sub-prime market, with FICOs between 550 and 660 is a specialist market. Most sub-prime cards charge very high interest rates (36% not uncommon), plus an annual fee and/or monthly fee, application fee, credit limit increase fee and very small credit lines, usually under $500.
The king of the sub-prime market is Capital One, the nation’s second largest issuer and one of the most profitable card issuers. Around one-third of Capital One cardholders have a credit score of 660 or below, according to analysis by RAM Research.
Secured Credit Cards
As an alternative, most issuers, offer a secured credit card, which requires a security deposit equal to the credit line. Secured cards generally offer similar pricing with rates and fees charged on near-prime cards.
Sub-prime cardholders with a credit score below 660 will have their account details reported to all three of the major credit bureaus: Equifax, TransUnion and Experian.
It usually takes about two years for the payment history to significantly help your sub-prime credit score as long as you have no history of a late payment and keep the balance below 50% of the credit limit.