Sub Prime Lending

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http://www.wikinvest.com/concept/Subprime_lending
Subprime lending is the practice of extending credit to borrowers with certain credit characteristics -- e.g. a FICO score of less than 620 -- that disqualify them from loans at the prime rate (hence the term 'subprime'). Subprime lending covers different types of credit, including mortgages, auto loans, and credit cards. Since subprime borrowers often have poor or limited credit histories, they are typically perceived as riskier than prime borrowers. To compensate for this increased risk, lenders charge subprime borrowers a premium. For mortgages and other fixed-term loans, this is usually a higher interest rate; for credit cards, higher over-the-limit or late fees are also common. Despite the higher costs associated with subprime lending, it does give access to credit to people who might otherwise be denied. For this reason, subprime lending is a common first step toward “credit repair”; by maintaining a good payment record on their subprime loans, borrowers can establish their creditworthiness and eventually refinance their loans at lower, prime rates.