GoFuckYourself.com - Adult Webmaster Forum - View Single Post - Credit-Card Issuers Circling Subprime Borrowers Again

Barefootsies · 10-18-2011, 05:58 PM

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NEW YORK (Dow Jones)--Credit-card issuers are knocking on the doors of subprime borrowers again as they look for ways to grow their business amid stiff competition.

The move is part of a broader effort by banks to lure more credit-card customers after many lenders retrenched from the subprime market. A surge in losses from soured loans during the recession and a regulatory overhaul prompted many of the largest credit-card issuers to focus exclusively on borrowers with the best credit.

To be sure, banks' return to subprime credit cards represents more of a baby step than a full-on race. By and large, issuers are still approaching the market with caution, offering those customers small credit lines and charging higher rates, analysts said.

But experts anticipate the trend will accelerate, barring a double-dip recession. And the latest industry data bear this out.

Banks issued 5.4 million new credit cards to subprime borrowers through June, up 64% from a year earlier, according to the most recent data from credit bureau Equifax. The company defines a subprime borrower as having an origination risk score--a proprietary definition--of less than 660.

While the number of subprime cards pales in comparison to the 14.7 million that banks issued in the first half of 2007, their growth outpaced the 27% year-over-year increase in total credit cards issued through June of this year.

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. "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."

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