Borrower Risk Profiles | Consumer Financial Protection Bureau (2024)

FAQs

What is the risk profile of the borrower? ›

A consumer's credit score can be an important determinant of their access to credit. These interactive graphs show how lending activity has changed for borrowers with different credit score profiles.

And in many cases, lenders use information like the applicant's credit history and DTI ratio to assess credit risk. Generally speaking, borrowers with higher credit scores are considered less risky to lenders.

What Is a High-Risk Borrower? Lenders label a loan applicant as a high-risk borrower when the applicant's low credit score and/or poor credit history means he or she has a high possibility of defaulting. To a lender, a high-risk borrower likely has few, if any, other options for a loan.

Subprime (credit scores of 580-619) Near-prime (credit scores of 620-659) Prime (credit scores of 660-719) Super-prime (credit scores of 720 or above)

A risk profile example pertaining to risk-aversion would be of an individual who would rather maintain the value of their portfolio than aim for high or even moderate returns.

Examples of some of the issues a risk profile can communicate include: • the overall level of risk being carried by the entity • how the entity's current risk exposure compares to its appetite for risk • themes, patterns or common issues amongst the entity's risks • areas of shared risk or interdependency • warning of ...

Students classify those characteristics based on the three C's of credit (capacity, character, and collateral), assess the riskiness of lending to that individual based on these characteristics, and then decide whether or not to approve or deny the loan request.

FICO^® Scores in the 740 to 799 range are deemed very good. Individuals with scores in this range may qualify for better interest rates from lenders. Good: 670 to 739. FICO^® Scores in the range of 670 to 739 are rated good.

FICO® scores are the credit scores most lenders use to determine your credit risk and the interest rate you will be charged.

There is no one-size-fits-all answer to the credit scores that lenders consider subprime, but Experian provides a classification: FICO Scores that fall within the fair and average credit range — between 580 and 669 — are classified as subprime.

Is Capital One a subprime credit card? ›

Despite being the fourth-largest credit card lender overall, Capital One is America's largest subprime credit card lender, with a higher percentage of its total credit lending in the subprime segment compared to rivals like JPMorgan Chase, Citi, or Discover.

Experian, the consumer credit reporting company, says about 30% of U.S. consumers have a subprime credit score. In comparison, 48% of Capital One's auto and 31% of its credit card loans are to subprime borrowers. This customer base could be heavily impacted during an economic downturn.

Those with credit scores from 580 to 669 are generally seen as “subprime borrowers,” meaning they may find it more difficult to qualify for better loan terms. Those with lower scores – under 580 – generally fall into the “poor” credit range and may have difficulty getting credit or qualifying for better loan terms.

A high-risk borrower is someone who a lender or creditor would consider more likely to default on his or her loan. High-risk borrowers have certain characteristics in common. But before we get into those, there's something to consider regarding borrowing money in general.

580 to 669: Fair

Lenders may consider them higher-risk, and they may have trouble qualifying for new credit.

That doesn't mean it's impossible to get a loan if your credit score is low, though. Some lenders offer “high-risk loans” for borrowers with a low credit score to have access to the funds they need. However, these loans often come with a higher interest rate and fees, along with collateral requirements.