Credit Card Delinquencies Remain Low Despite More Subprime Lending
Even though subprime consumers are once again being courted and approved by credit card issuers, credit card delinquency rates have remained steady for the past year. These are the findings of the latest TransUnion Industry Insights Report.
Subprime consumers are those with troubled credit who do not qualify for traditional lending programs. The credit cards and loans extended to these consumers tend to have high interest rates, low balances, and strict terms for repayment. After the economic crash of 2008, many Americans found themselves defaulting on loans and credit cards, eventually leading them into being classified as subprime consumers. Now that these individuals are getting a new chance to prove themselves, they are repaying their cards on time and maintaining relatively low delinquency rates.
Despite the new lending opportunities for subprime consumers, the amount of money they are allowed access to continues to decline. The average new account line is now $923, the lowest it has been since 2012.
“Subprime consumers continue to gain access to credit, but lenders have scaled back the average new credit line for this group,” said Paul Siegfried, senior vice president for TransUnion. “Lenders are deliberate and approaching subprime originations cautiously.”
The subprime group made up 18% of all new account originations, up from 14.7% a year ago. Overall, new accounts increased 11.2% to 13.1 million. The average credit line per borrower dropped slightly to $5,199 in the second quarter of 2015, down from $5,234 the same time last year.