Sub Prime Credit

Industry slang and term much used by the media for people with a less-than-perfect record of repaying their credit commitments. Typically used to refer to those with all or any combination of the following entered onto their credit reports: late payments, defaults, judgments, repossessions, IVA’s and other ‘adverse’ items on a credit file. See also Adverse credit.

The term may also be used to describe those with little history of managing credit, as they have limited debt experience and are therefore viewed as untested and subsequently more risky by lenders. Individuals seen as having sub-prime credit will find it more difficult to obtain credit than those with spotless credit reports and will also normally find themselves paying a higher interest rate on any credit extended to them. This is because, statistically speaking, sub prime borrowers are more likely to default on payments than prime customers, and lenders need to cover themselves against this higher risk.

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