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  • Super Prime vs. Subprime

    Friday, January 27th, 2017

    Super PrimeThe Super Bowl has become an unofficial American national holiday.  Over 100 million people are expected to watch and it is second only to Thanksgiving for U.S. food consumption.  Players from the 2017 winning team will earn $97,000 each and the losers will earn $49,000.  Not bad for one hour of work.

    The average pay for all players in the 2017 Super Bowl is $73,000, which just happens to be the average household income in the United States.  Most Americans rely on credit to supplement their lifestyles.

    Access to credit and the best credit terms in America depend on your credit rating.   The highest credit tier is referred to as “Super Prime” and the lowest credit tier possible is “Subprime”.

    American consumers are broken up into four generations; Millennials (18-36), Generation X (37-51), Baby Boomers (52-70), and the Silent Generation (70+).  You might guess that those with the most credit history are the most likely to have a Super Prime credit rating.  That is true, but maybe not for the reason you think.  Length of credit history only accounts for 15% of the FICO credit score.

    The primary reason for the generational discrepancy is, “Debt vs. Available Credit”.  In other words, what percentage of available credit is a consumer using.  This accounts for 30% of the FICO score.

    Millennials use on average 79% of the credit available to them and 42.98% of Millennials have a Subprime credit rating, the highest of any generation.  In contrast, the Silent Generation use on average just 51% of the credit available to them and more than 50% of that generation enjoy the highest credit tier, “Super Prime”.

    Whether an American consumer is 18 or 75, if they want to reach the Super Bowl of credit ratings, “Super Prime”, they won’t get there without reducing their amount of debt as compared to available credit.