Smart Borrower Blog

Credit Card Lenders Look To Subprime Borrowers Again

Oct 12th, 2011 @ 1:16 PM by Amber Nelson

After a few years of dramatically tightened lending standards, some banks and credit card companies are starting to reach out again to borrowers with less-than-perfect credit scores.

According to data from credit bureau Equifax, new credit card accounts to subprime borrowers, those with a credit score below 660, rose 64 percent in the past year to 5.4 million during the first half of 2011. That growth dwarfed the 27 percent growth rate of total credit cards issued through June.

Banks “want to grow and you can’t grow if you’re only lending to super-prime and prime customers all the time,” said Michele Raneri, vice president of analytics at Experian, one of the three major credit bureaus as quoted in a Wall Street Journal article. “A normal strategy is to look across the risk spectrum and to lend to as many consumers as you can, and so they’ve started to pull back from this flight-to-quality strategy a little bit.”

Michael Koukounas, senior vice president of special client services at Equifax, said that banks are moving forward on subprime credit offers because their own portfolios have become more stable, with fewer late payments and charge-offs.

“This is truly a reflection of the improvement in the performance of the recent vintages” of card loan originations, he said. “You’re seeing those vintages performing at a pre-recession level. That has made the issuers of bank cards…more comfortable in how they want to approach the folks that are below 660.”

Equifax didn’t have details about which banks were stepping up their lending to poor credit borrowers, but a separate survey from Synovate Ltd. showed that of all the credit card offers sent to those with a credit score under 660 during the third quarter, Citigroup Inc. was responsible for 33 percent. That’s up from a 15 percent share in the second quarter. Discover Financial Services sent out 7 percent of those mailings, compared with 3 percent from the second quarter.

Unless a double-dip recession materializes, this increase in credit card offers to subprime borrowers is expected to continue.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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